Looking Past What is Seen

One of the biggest concerns people have is the state of the economy, more specifically having jobs available. Whether it’s blamed on cheap labor in foreign countries or increased mechanization, many people are fearful of a declining job market. The concern for jobs has kept alive beliefs in harmful economic fallacies because people are focused on what is immediately seen and ignore the unseen.

Contrary to popular belief, the amount of employment means nothing in regards to the strength of an economy. Producing value, however, does. The Soviet Union had virtually no unemployment throughout their history while the unemployment rate fluctuated in the U.S., reaching as high as 10% in the early 1980s. Yet, the standard of living was dramatically better in the U.S. than it was in the Soviet Union. This is because the market economy, despite having unemployment, produced goods of value for consumers in the United States. Meanwhile, centrally planned production in the Soviet Union did not create goods of value to the people, causing a low standard of living despite having full employment.

With increased technology less labor is needed to perform work that required people to do in the past. A fairly recent example of this is the growing use of self-checkout machines causing a declining need for cashiers. All too often I hear how it’s a shame these machines exist and that jobs are being destroyed because of them. People conclude these machines are harmful to the economy. Instead, new machinery should be viewed as a blessing to our economy, not a curse. People see the job of the cashier is lost, but don’t acknowledge what is not immediately seen. While there is one less job for a cashier to be employed, there is also a would-be cashier that is now able to contribute to the economy in another way; be it as a barber, cook, or factory worker. The introduction of new machinery is a net gain for the economy—the work of the cashier is being done plus now there is another laborer available who can produce an additional good or service. If a person honestly believes technological advances are harmful because they destroy jobs, then they should advocate that lightbulbs ought to be banned because it will employ a plethora of candle makers who had lost their jobs since the 19th century.

The belief that jobs are inherently good has led to people buying into dangerous economic fallacies. Paul Krugman echoed one of these persistent fallacies when saying the 9/11 attacks could do some economic good. After all, the towers will have to be rebuilt which will require many workers and create thousands of jobs for people. Viewing this as positive for the economy is once again looking at what is seen and forgetting the unseen. What is not seen is what the thousands of workers could have produced instead of rebuilding what existed. Without the attacks, the U.S. economy would have the World Trade Center plus what would have been produced with all the resources used to rebuild. To Paul Krugman’s liking, the economy now has less wealth than it would otherwise have if the attacks did not happen. If rebuilding was truly beneficial to an economy, then New Orleans would be thriving thanks to Hurricane Katrina.

This fallacy appears again in the form of support for public works programs. Many people believe to stimulate an economy during a recession or depression the government ought to employ people in public work programs, regardless of what the job is. The argument is if a person is employed in a work program then they will earn money which will be spent on goods or services and thus stimulate the economy. This ignores what is unseen. The money needed to pay the worker has to come from somewhere, and that place is the private sector of the economy. So not only does the public works program take away a potential laborer from the economy, it also takes money away that would have been invested in the private sector to further grow the economy. As we saw with the Soviet Union, government employment of people does not create economic wellbeing.

I could continue with countless examples of such fallacies prevailing. The takeaway point of this is that one must look at the unseen as well as what is seen when evaluating economic outcomes. Additionally, it is much more important to be concerned with the production of value than employment numbers. If jobs were all important, we should reject technological advances from the industrial revolution because then everything would require more labor. Of course nobody advocates that, but the fear from technology taking over jobs is still all too persistent and the good of technology is often unrecognized.


2 thoughts on “Looking Past What is Seen

  1. The Broken Window fallacy seems to keep crawling back into public debate despite the obvious truth that destruction of goods to create activity leaves us with a net loss of goods. I like the example that is oftentimes attributed to Milton Friedman of building bridges with spoons rather than bulldozers if the goal is, in fact, to employee people and create jobs.

    • Henry Hazlitt does a good job of explaining the fallacy and why it always reappears in public debate in his book Economics in One Lesson. It’s a shame that book is rarely taught in classrooms.

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