How to seek employing the unemployed.

[aderwent]

Proposal:

"The best way to lower unemployment is to forget about it. It’s just a number. If you work on creating new, sustainable jobs, unemployment will take care of itself. If you worry about unemployment, you end up creating jobs for the sake of creating jobs. These lower efficiency, and often are temporary jobs (such as stimulus construction jobs).

Look at it like this. You have two people. Person A has a job, person B is unemployed. For the sake of creating jobs, you split A’s job in half, and give B half (which I’ve seen is some companies’ way of “thwarting” the recession). Now, we have one more job, and one less person unemployed (which is why you get all giddy)… but then you fail to look further. Instead of one living under the poverty line, we have two. Work is less efficient as well.

Further, if you work on producing more, the need for more jobs is inevitable. So, forget about jobs, forget about the unemployment number, and start producing. More production—>more real jobs—>lower unemployment. We’re thinking backwards."

Rebuttal:

"no, supply side economics has it backwards. its not an issue of supply, it is a lack of demand. how to you raise demand? by making sure that people have money. If someone has a job, even a temporary one, it doesn’t just affect them. It affects the grocery store where they buy food, and the manufacturer they buy a car from, and the retailer where they buy some toys for their kids. We have incredibly high supply, with little demand, since worker productivity is through the roof while wages have pretty much flatlined. we’ve made up the gap with credit, making sure that people can still buy stuff even though we’re not paying them enough to afford it.

that’s what made the crash. and since the crash dried up all the credit, we lose jobs and we lose demand. we don’t need more production- we need more demand. In the short term, that means making credit available again, and forcing bailed out banks to lend, and not play roulette with our money. But in the long term, that means paying people a decent living wage for working hard, and making sure that wages keep track with production. It means making it easier for workers to form unions and advocate for their own interests. And it means regulating the shit out of the credit industry."

First, how would you improve the initial post?

Second, what’s your rebuttal to the rebuttal?

(I’m a newbie when it comes to economics, and try my best to learn both sides of the argument. I bought the beginner’s pack of books from the Mises Store, but also like to learn others’ points of view and what not. Also love playing devil’s advocate. No better way to defeat the opposition than to know their position (and its flaws) as well, if not better than them (IMHO))

[Kakugo]

That’s a very good start but let’s add a couple of things.

Cheap credit creates bad investments in the first place. Bad investments include economical activities that would not be feasible under a healthy credit system or wouldn’t be allowed to live for long before going burst. These investments bear with them jobs: imagine all the people working in those extravagant theme shops so popular in the Naughties. When a correction comes these business activities have to close shop or “restructure” fast: this means their employees lose their jobs well before those in other more solid sectors. Also excessive expansion due to cheap credit is another source of potential unemployment: imagine car manufacturers expanding their production because cheap credit fuels a rush to new cars. When a correction comes production needs to be reduced: the manufacturer needs to lay off workers.

Another thing is the labor market. In a time of high unemployment the labor market should be flexible enough to allow workers from the least efficient part of the market to relocate into the more efficient. But entry into this more efficient sector is restricted: this may be either through taxation making imperative to hire as few employees as possible to make a profit, union agreements restricting entry into their own sector etc. This surely artificially lowers demand.

I must say I particularly like your approach to the supply/demand of labor and worker productivity. So you may as well add a bit about how government meddling artificially reduces workers’ output to increase the number of people you have to hire to get the same end result. The French government working with large unions to restrict the work week to 35 hours was designed specifically to force employers to hire more people to get the same job done. This proved counterproductive as each new employee costs exactly the same as the old one so increasing costs. Employers reacted into two possible ways: the larger ones simply invested in technology increasing workers output, the smaller ones simply paid their employees a “little tax-free extra” to work a few more hours outside the law-mandated working hours.

Finally let’s address the idea that people needs to have money to keep the economy going. In countries with deep Socialist or Solidarist traditions like France, Italy and Germany this is a well known drill. If a large enough firm has to lay off workers because is on its last legs they ask the government to step in: a number of workers are temporarily laid off and get paid a percentage of the last salary (from 50% upwards) to stay home and do nothing. They cannot get a new job but who would? The costs are fully forked by the taxpayer and car manufacturers have learned to use it to their own advantage by shutting down assembly lines temporarily when they have excess production (90% of the time) to get rid of stocks. Losses are socialized while profits are privatized but this is all to “help workers” in the name of solidarity.

Hope this helped you out.

[Snowflake]

@Kakugo

Finally let’s address the idea that people needs to have money to keep the economy going. In countries with deep Socialist or Solidarist traditions like France, Italy and Germany this is a well known drill. If a large enough firm has to lay off workers because is on its last legs they ask the government to step in: a number of workers are temporarily laid off and get paid a percentage of the last salary (from 50% upwards) to stay home and do nothing. They cannot get a new job but who would? The costs are fully forked by the taxpayer and car manufacturers have learned to use it to their own advantage by shutting down assembly lines temporarily when they have excess production (90% of the time) to get rid of stocks. Losses are socialized while profits are privatized but this is all to “help workers” in the name of solidarity.

Rearranging chairs on the titanic… A system of personal profits and shared losses is disastrous.

[Stranger]

You can’t think of production and demand as aggregates. In a recession, the shrinking supply of credit lowers demand for higher-order (“long”) goods, hence the price of them falls and the industries that produce them can no longer turn a profit increasing the supply. They must close down and lay off employees. Now unless other industries expand by investing capital, there will not be any job opportunities for this extra labor force as labor must be combined with capital to be productive.

That means that for all short goods producing industry, capital investment must be made more attractive. This is made easier by the bankruptcy liquidation of the industries producing long goods, but bailouts are meant to stop that from happening! So are price controls and incentives, although other than union contracts those have fallen out of favor.

[ClaytonB]

@aderwent

Proposal:

"The best way to lower unemployment is to forget about it. It’s just a number. If you work on creating new, sustainable jobs, unemployment will take care of itself. If you worry about unemployment, you end up creating jobs for the sake of creating jobs. These lower efficiency, and often are temporary jobs (such as stimulus construction jobs).

Look at it like this. You have two people. Person A has a job, person B is unemployed. For the sake of creating jobs, you split A’s job in half, and give B half (which I’ve seen is some companies’ way of “thwarting” the recession). Now, we have one more job, and one less person unemployed (which is why you get all giddy)… but then you fail to look further. Instead of one living under the poverty line, we have two. Work is less efficient as well.

Further, if you work on producing more, the need for more jobs is inevitable. So, forget about jobs, forget about the unemployment number, and start producing. More production—>more real jobs—>lower unemployment. We’re thinking backwards."

Hans Hoppe denies the possibility of involuntary unemployment in a free market. At a low enough price, employment is always possible. Therefore, unemployment is created by the state, in particular, its minimum wage laws and other regulations that increase the costs of employing labor.

As for the rebuttal, anyone who divides the economy into a “supply side” and “demand side” is an ignoramus. Price is a function of both supply and demand (simultaneously), it is impossible to determine the “supply contribution” versus the “demand contribution” to price. Price floors (like minimum wage, which isn’t even a price floor so much as a price ban) have the effect of distorting both supply and demand. Supply of labor is increased and demand for labor is decreased by the minimum wage, creating an artificial glut of labor (high unemployment).

It’s not correct to say that forgetting about unemployment will lower it since there are so many other factors than just the state’s overt measures to “reduce” unemployment which cause unemployment. However, all state measures which increase the cost of employment will reduce demand for labor and all state measures which increase the price of labor will increase the supply of labor. Both factors contribute to unemployment.

Clayton -

[Smiling_Dave]

@aderwent

Proposal:

"The best way to lower unemployment is to forget about it.

if you have a big strong bull [govt] that eats up most of the grass [money], the cows [private businesses] wont have enough food [money]to produce any milk [things people want]. Not least of which, they can’t afford to hire people. So the best way to lower unemployment is for the vampire to get out of the way.

It’s just a number. If you

Who is the “you”?

If "you is the gov’t they should not be working on anything at all. Because whatever they do, it’s the vampire sucking blood from the neck, drinking most of it, and spitting out a bit into the blood transfusion. The govt only has money to give by taking it away from someone first.

If “you” is a private citizen, yes hiring people if I can afford it will create more jobs. But make it worth my while, or I won’t bother.

work on creating new, sustainable jobs, unemployment will take care of itself.

If you worry about unemployment, you end up creating jobs for the sake of creating jobs. These lower efficiency, and often are temporary jobs (such as stimulus construction jobs).

Look at it like this. You have two people. Person A has a job, person B is unemployed. For the sake of creating jobs, you split A’s job in half, and give B half (which I’ve seen is some companies’ way of “thwarting” the recession). Now, we have one more job, and one less person unemployed (which is why you get all giddy)… but then you fail to look further. Instead of one living under the poverty line, we have two. Work is less efficient as well.

All very true. There is a lot more to it as well.

If you live in a rich country, even if you are poor, you are bound to be better off. The rich are always buying new stuff, and you get the older stuff [used car, older house, etc] at a price you can afford. And it’s usually in pretty good condition, certainly better than the mud hut to live in and barefoot walking that you would have in a town in India, for example.

Even if you have a crappy job, you will be able to buy much much more and much much better things than the poor country citizen.

In short, the way to improve everyone’s lot is for the country as a whole to be rich. Now what makes a country richer than it was last year? If they produced more things than last year. So the goal is not to give everyone a job [which can by done instantly by outlawing, say, tractors and requiring all digging to be done with spoons], because unproductive jobs don’t increase production, by definition. And hiring someone for only half a day is wasting his productive capacity, meaning we are not going to get richer by him working just half a day.

Further, if you work on producing more, the need for more jobs is inevitable. So, forget about jobs, forget about the unemployment number, and start producing.

As above, make sure it’s the right “you” doing the producing, for the reasons above.

More production—>more real jobs—>lower unemployment. We’re thinking backwards."

Well said.

Rebuttal:

"no, supply side economics has it backwards.

We’re not talking about supply and demand. We are talking about getting the vampire to take a rest.

its not an issue of supply, it is a lack of demand.

Demand does not make a country rich. The sum total of things it has to divvy out is the measure of its wealth, as above. So how does increasing demand improve the economy? Because now someone will buy the crap in the factories no one wanted? How will this help? The factory will now make money and hire workers to make even more crap no one wants? This improves the economy how?

“Ah, silly goose. They wanted it, but they couldn’t afford it. Now they can afford it.”

“And the owner of the factory knew he was making stuff no one can afford? So why did he make it? And if he was stupid, why should he be rewarded? So he can keep on being stupid?”

how to you raise demand? by making sure that people have money.

Huh? How can I make sure people have money? remembefr, the govt has no money of its own. The only money it can give to Mr A, to make sure he has some, is by taking it away from Mr B. So you make Sure A has money by first making sure B doesn’t have any.

If someone has a job, even a temporary one, it doesn’t just affect them. It affects the grocery store where they buy food, and the manufacturer they buy a car from, and the retailer where they buy some toys for their kids.

When you take away money from B, it doesn’t just affect B. it affects he grocery store etc etc, all of whom will be losing money.

We have incredibly high supply,

What exactly do we have an incredibly high supply of? Cars no one wants? Houses no one wants?

with little demand,

Oh if the price goes down low enough, people will buy it.

since worker productivity is through the roof

This means, by definition, that the thing produced is cheaper to make, by far, than ever. So that a good businessman can lower prices and still make a profit.

Why isn’t this happening? Because the retard made stuff nobody wants.

while wages have pretty much flatlined.

This is an absurdity. If a worker is so productive, then obviously it’s worth money to have him producing, meaning he should be getting paid more. He is needed now. So why have wages flatlined? The real reason is the regulations and other garbage the vampire has introduced have made it unprofitable to hire the guy at his real worth.

we’ve made up the gap with credit, making sure that people can still buy stuff even though we’re not paying them enough to afford it.

This is true. People have been suckered into living beyond their means. True, but irrelevant.

that’s what made the crash.

This might be true. I’m not sure.

and since the crash dried up all the credit, we lose jobs and we lose demand.

This, is not strictly true. Demand is the amount of people who want a thing that can afford it. If they are able to buy it by borrowing money they can’t repay, well that demand was a phony demand.

we don’t need more production- we need more demand.

Why?

In the short term, that means making credit available again,

Lemme see, the crash was caused by lending money to people who can’t afford to repay it ["we’ve made up the gap with credit, making sure that people can still buy stuff even though we’re not paying them enough to afford it. that’s what made the crash."]. So the solution is to do more of the same? Huh?

and forcing bailed out banks to lend,

Banks are in business to make a profit. They make a profit by lending money to people who can afford to repay it. They have losses by lending money to people who cant afford to repay it. This is their business, they live and breathe this 24/7. So if they don’t want to lend to someone, why is it? Because he will pay them back with interest and they will make a profit, but they just have gotten tired of making profits? In that case, yes we should force them to do what they suddenly hate, make money.

and not play roulette with our money.

if they don’t lend it to a someone because he is a risk, that is roulette. But if we force them to lend to someone who in their experienced estimate won’t pay it back, that is not roulette. Oh.

But in the long term, that means paying people a decent living wage for working hard,

is anyone against that? An employer has to pay a decent wage, or people will work for someone else.

and making sure that wages keep track with production.

How can anyone make sure of something like that? Are they God? Wages and production are determined by market forces, by invisible laws that do their thing as surely and as powerfully as gravity. How can we make sure of anything?

It means making it easier for workers to form unions and advocate for their own interests.

What is hard nowadays about forming a union? And if you mean making laws that force unions down people’s throats, that is what has destroyed the formerly super productive Rust Belt [see Wikipedia].

And it means regulating the shit out of the credit industry."

Now there’s a can of worms if ever there was one. Regulation in the real world have only one intention, and indeed only one result, the intended one. The intention and result of all govt regulation is to make it harder for someone to start a business, thus protecting existing ones unfairly.

What regulations do you propose? Forcing them to lend money, as above?

First, how would you improve the initial post?

Second, what’s your rebuttal to the rebuttal?

(I’m a newbie when it comes to economics, and try my best to learn both sides of the argument. I bought the beginner’s pack of books from the Mises Store, but also like to learn others’ points of view and what not. Also love playing devil’s advocate. No better way to defeat the opposition than to know their position (and its flaws) as well, if not better than them (IMHO))

[aderwent]

Thank you everyone for your input! It really did help kick start things for me. It’s getting me all amped about economics again (yeah, I’m a loser haha).

Let me give you a Keynesian’s response to your posts:

Speaking directly to the “lending credit to people who couldn’t repay it caused the crash” comment:

"Well, there were many things but this was one of the biggest that stuck out. One of the major events of the decade right after 911, and you’ve got it completely wrong.

Sure Government opened the door for people to get mortgages but banks, operating in a much different fashion than they have before due to lack of regulations. Began buying these sub prime mortgages and bundling them and selling them, on top of aggressively pursuing them. Wall street geniuses created exotic formulas that these large institutions bought into, hey! its the housing market, before the recession it never went down. So with trillions of dollars of risky loans in these banks portfolios, when the loans began defaulting a domino effect was created that eventually saw many of these institutions on the verge of crumbling.

And to let them fail would have undoubtedly led to a depression, and anything, is better than a depression."

[liberty_student]

@aderwent

(yeah, I’m a loser haha).

You’re not a loser. You’re seeking enlightenment. Never feel bad about that.

@aderwent

Sure Government opened the door for people to get mortgages but banks, operating in a much different fashion than they have before due to lack of regulations. Began buying these sub prime mortgages and bundling them and selling them, on top of aggressively pursuing them.

Without the sub prime loans, they would not have been able to buy them. He’s making an error in the sequence of events.

@aderwent

And to let them fail would have undoubtedly led to a depression, and anything, is better than a depression

We’re still going to have the depression. They are still failures, and their losses still have to be realized. All that has happened, is that the losses have been pushed off into the future to be paid for by the taxpayer, with interest. And when interest rates rise, as they inevitably must, those losses are going to be a catastrophic burden on the system. This is a brief reprieve. Nothing systemic has been improved.

[aderwent]

“It’s not really a matter of dealing with the pain of their failures now or later. When you’re talking about the banks failing in Fall 2008, you’re talking about ALL global credit markets completely seizing up. US corporations wouldn’t be able to make payroll - they would have been reduced to financial autarky. It would have been almost unimaginably worse.”

[Smiling_Dave]

@aderwent

Let me give you a Keynesian’s response to your posts:

Speaking directly to the “lending credit to people who couldn’t repay it caused the crash” comment:

"Well, there were many things but this was one of the biggest that stuck out.

Yes of course it caused the crash. We are in agreement on this. You mentioned it in the anti- AE part of the original post. Every crash is caused by money going to foolish places. This time it was to people who won’t repay.

One of the major events of the decade right after 911, and you’ve got it completely wrong.

No I don’t.
Sure Government opened the door for people to get mortgages

This is the root cause of every crash, the Govt [the Fed] giving out easy money, i.e. low interest rates. Every crash has this first step. Every single one. This time it went to mortgages. At other crashes it went to something else. But it always starts with that. Look it up. It’s well documented on this site.

but banks, operating in a much different fashion than they have before due to lack of regulations.

Please point out exactly what regulations tied the hands of those evil evil banks until 911, that was repealed after 911. Let me guess. There is none.

Began buying these sub prime mortgages

Factual mistake here. Banks don’t buy mortgages, they lend people money and thus get a mortgage on the person’s house.

Now let us examine why, after all these years of banking history, banks started lending money to sub prime people, meaning, by definition, people who are VERY VERY VERY likely not to repay the loan.

Why have they never lent money to people who won’t repay? Was it cruelty? Was it racism? Was it greed? No, it was common sense. Nobody in his right mind will lend money to people who will not repay, and hope to turn a profit.

No regulation was needed to stop the banks from throwing their money away. So now the opposite q comes up. Why did they suddenly start giving out sub prime mortgages? Did they suddenly turn stupid? Nope, what happened was they found suckers willing to pay good money for the right to collect the interest on the loan, and in return suffer the loss in full if the loan wasn’t repaid.

Now the question arises, who were these retards? Why did they not exist until now? Were stupidity pills dumped into the drinking water after 911? Well yes it was apparently, because Fannie and Freddie, Gov’t backed agencies, told the banks,“Lend the money and we’ll guarentee the loans.” The were the willing patsies. It is left as an exercise to the reader to figure out why they were the ones idiotic enough to do such a thing. Hint:Whose money were they putting at risk?

and bundling them and selling them, on top of aggressively pursuing them.

And why shouldn’t they? If there’s a gold mine in front of you, mine it for all it’s worth. Read the previous paragraph to see who gave them the mine.

Wall street geniuses created exotic formulas that these large institutions bought into,

When you buy something really expensive, do you do any research first? Like looking it up in consumer reports, or asking friends with experience, or SOMETHING? And if you don’t and you get burned, who is at fault? And if it is your business to do this every single day for years, who is responsible to make sure you don’t get shafted?

BTW there used to be rating agencies who charged money to anyone who wanted to buy stuff like this. The large institutions would pay them a fee and find out whats what. But the govt decided this valuable service has to be free. They made it illegal to pay an agency for this info. Instead the rating agency gets paid by the bank. So that the guy being watched chooses his watchdog and pays his salary. And lo and behold the not very surprising results. they rated garbage as AAA.

hey! its the housing market, before the recession it never went down.

Huh? Look at this graph.

__*http://blog.jparsons.net/2009/01/graph-us-housing-prices-1890-2008.html*__

What does it tell you? Hint: Does the red line only go up? Also, is there anything odd about the right end of the red line?

So with trillions of dollars of risky loans in these banks portfolios, when the loans began defaulting a domino effect was created that eventually saw many of these institutions on the verge of crumbling.

True.

And to let them fail would have undoubtedly led to a depression,

Maybe, maybe not. Maybe the only thing that would have happened is that these dinosaurs would have died. Who cares?

and anything, is better than a depression."

Is an even bigger depression better than a depression? because Bush and Obama are doing everything, literally everything, especialy bailouts and spending money like it’s someone elses, to make our situation much much worse. Read the stuff on this site [or watch some Peter Schiff videos] to know why.

[Smiling_Dave]

@aderwent

"It’s not really a matter of dealing with the pain of their failures now or later. When you’re talking about the banks failing in Fall 2008, you’re talking about ALL global credit markets completely seizing up.

I’m not sure what evidence you present for this. Well, yes I am. None.

Also, I’m not sure what you mean by this scare tactic language. What exactly does “seizing up” mean? But let me guess. it means someone who has money [let’s call him Mr Rich] would be reluctant to lend it to anyone [say US Corporation X, or X for short] unless he was pretty damn sure X would be able to pay him back.

And this is a bad thing? You want Mr Rich to throw his money away, too?

US corporations wouldn’t be able to make payroll

So you are saying most US Corporations have to borrow money every time they pay their employees? I don’t believe it. In fact I know it’s utter non sense.

• they would have been reduced to financial autarky.

I looked up autarky. Here’s what I found:

1.	the condition of self-sufficiency, esp. economic, as applied to a nation.

2.	a national policy of economic independence.

So you are saying they would have had enough money to pay the bills without having to borrow money. And this is bad?

Maybe you mean that they would have been unable to borrow money to meet their payroll. Well first of all that is total fiction. Unless of course you will provide a link with a list of US Corporations that have to borrow money every single payday, in which case I will concede my error [probably with bad grace]. I think Bush said some such thing, but sadly, I don’t believe him either.

Second, you are telling me that the taxpayer is expected to give free money with nothing in return to a Company that is so incompetent and poorly run that it can’t even meet it’s payroll. Why? What is in it for the taxpayer? And of what benefit is it to the country as a whole to fill it with incompetent poorly run companies?

It would have been almost unimaginably worse."

As before, you are presuming a fictional situation, that corporations need to borrow money every payday.

In addition it would be unimaginably BETTER if a company that is incompetent goes out of business. Its offices and employees are then freed up to be used by someone who knows what he is doing.

[billott1]

Bills Proposal:

The best way to get a higher percentage of people in society is simple. Apply these two rules and people will create jobs on their own:

1. MOST IMPORTANT: Remove/reduce/do not enforce regulations that effect people from performing tasks that do not harm others or hinder people from making future economic calculations. This includes every imaginable regulatory body from the FDA to the Federal Reserve. Let private interests perform regulatory tasks.

2. Reduce the incentives to be unemployed. Remove workers compensation and unemployment insurance and let private entities supply these goods. Then workers will purchase an amount of these goods according to their preferences. For example: A person making minimum wage would probably buy a lot of workers compensation and a little unemployment insurance while a high wage earner would buy a different combination of these two services.