But Think of the Lost Jobs!

by Don Boudreaux on April 20, 2009

I allow myself a second, and final – and vain – commemoration of the Cafe's fifth-year anniversary. It remains one of my favorite posts at Cafe Hayek; it's the second one I did here:

April 20, 2004

Polio vaccination and jobs

Don Boudreaux

50 years ago this month, Dr. Jonas Salk launched
nationwide testing of his polio vaccine. Within an incredibly short
time (and with help from the researches and refinements of Dr. Albert
Sabin), polio was effectively wiped out as a health threat in America.

But there’s a downside: job loss. How many workers, who played by
the rules, lost their jobs as a result of this development? People who
built wheelchairs and crutches, who helped manufacture iron-lung
machines, and who specialized in nursing polio victims – many of these
people were thrown out of work by the product supplied by Dr. Salk and
Dr. Sabin. Some of these workers surely found comparable alternative
employment quickly. Others took longer to do so. And probably some
others were obliged to accept jobs at much lower pay. Maybe some of
these workers never found new jobs.
…..
Of course, this downside is vanishingly insignificant compared to the
upside of the polio vaccine. But I mention it to highlight the fact
that particular jobs are eliminated by almost any economic or societal
change.

Why, then, in our public discussions do we focus so obsessively on
international trade as a source of job loss? When domestic consumers
shift more of their spending to imports, some specific domestic jobs
are lost – just as other jobs are created elsewhere in the domestic
economy – but there’s nothing at all unique about trade on this front.
Any – ANY – change in the pattern of consumer spending eliminates some
jobs and creates others.

Do we condemn the spaying of dogs because it reduces the demand for
dog catchers? Ought we to stymie research on electrical cars because,
if successful, such cars will cause many workers to lose their jobs in
oil fields? Should we denounce the Atkins diet because it will
eliminate some jobs in factories making pasta and chocolate? Are the
jobs threatened with elimination by spaying, electrical cars, the
Atkins diet, and the multitude of other economic changes having nothing
to do with international trade, less important to workers who hold them
than are jobs held by people working in industries that compete with
foreign suppliers?

Posted by Don Boudreaux in Trade

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Nethy

vidyohs,

As I said to start, I agree with the comment. The majority, if not all of trade, progress or other such changes create a benefit (in consumption) greater then the loss of those jobs - in aggregate.

The example though, is a demonstration of this principle at it's best. In this example, we do not need to imagine the need to imagine what the aggregate benefit brought by the change is. It is obvious and intuitive that eliminating a disease trumps the jobs that previously treated it.

A difficult case is where jobs are lost in the name of lowered cost of toothpicks, or greater variety of high-end mobile phones. These cases are longer intuitive.

To demonstrate a principle (which as I stated I agree with) & preach to the non-converted, I think it would be useful to tackle these.

I still think it's an elegant example.

vidyohs

Nethy,

Perhaps you need to reread Don's last paragraph above again. The point he made, seems to hold true.

I read the point as, "don't mourn the loss of jobs that are eliminated by beneficial progress, and certainly don't attempt to eradicate progress simply to save jobs."

Progress Vs consumption of luxury goods? Bait and switch, maybe?

Nethy

Don,

To you, it may be a celebration of 5 years.

To me, this is the first Cafe-hayek post I've read. And it's a great one. I will read on.

I agree with you, for the most part. But digging deeper, the reason why everyone doesn't see it this way is because not every example is as clear-cut as polio.

On that note, I'd like to challenge you.

Abstracted, you demonstrate that utility is not transferred from firms to people via wages. It is transferred via consumption, the ultimate purpose of wages.

But when 'production goes overseas,' we lose jobs & gain stuff. This is true even if we adjust our perspective to see wages from those jobs as the stuff we can buy. This is now more, in aggregate. There is some wealth creation - the surplus stuff we can buy in aggregate. There are some costs - the difference in employees old & new wages (which could be zero for a while).

It is very hard to think in aggregate about these things. But here it is so clear cut, that it's easy.

When its "wheel chair makers lose jobs and children can walk," it's easy to make your case. Even if you've never heard the term 'utility,' the concepts ring true. In total, we won from this trade. Preventing polio is better then good jobs.

But for a principle to be extracted from this, we need it to always hold true. You need to show that increased consumption of luxury golf clubs, SUVs, etc. are, when aggregated, better then jobs.

You can't get away from the need to think in unintuitive ways- in aggregate, on the margin, etc. Once we need to reconcile loss of jobs with the many things our economies produce less intuitively important then polio vaccines, we falter.

This is a challenge I'd like to see tackled.

muirgeo

OK, regarding outsourcing I stand corrected.

indianajim

Trumpit,

Are you totally ignorant of the great philanthorpic organizations that have been established by men and women who have succeeded in persuading free people to buy their products? Yes, I think you are.

vidyohs

"That is another reason I oppose it (capitalism) with my body and soul.

Posted by: TrUmPiT | Apr 21, 2009 2:37:12 AM"

Stupid beyond belief! Might as well oppose breathing with body and soul, the results will be the same.

Because you can't make capitalism work for you, and you can't make it work for people who won't work and behave responsibly, capitalism must be evil.

You almost had me STrUmPiT, I was on the verge of thinking you just might be a good satirist. But, no you really are an idiot.

TrUmPiT

I submit to you that crony, monopolistic capitalism kills far more people than polio ever did. Mankind is still searching for the magic bullet to put an end to it. The cure in this case would only put out of business the likes of the egotistical Donald Trump and his diabolical plans to destroy more virgin Scottish natural and wild habitat in order to build another unneeded golf course and luxurty hotel as another playground for the super rich. Polio, like the rich, is a scourge worthy of crippling defeat and Trump should be trumped out of commission and sent back to his crappy casinos in Atlantic City. Why are the worst type of people so often so rich. Capitalism has the bad habit of rewarding the worst people for doing wrong things repeatedly. That is another reason I oppose it with my body and soul.

MERLIN

What is a nation?

Healthy Markup

Merlin,

"If I lose a leg in defending my country, A, from country B, now must I be subject to the dislocatiion of competition from B? Is there not more to the national bargain?"

Tariffs make those who aren't protected by them poorer immediately and those in the protected industry find their industries slowly withering. If you want grateful nation A to transfer wealth to leg-loser A, just take money from the taxpayers of A instead of propping up a wasteful industry with tariffs. Or better yet, start a fund yourself, you can find like-minded people on the internet.

Countries linked by trade have greater incentive to avoid war.

Lincoln was much more unwavering in his support of the Morrill Tariff than the rights of non-whites, so I'm not sure about you're "national level" argument.

"Massive public investment" can be used to argue for anything. And the fact that governments make more projects the province of the public instead of the private sphere today means they can use this argument for more legislation in the future. It's the beauty of the Ouroboros.

Gil

You forget another type of job loss - more children surviving to adulthod, competing for the same number of jobs and creating a downward pressure on wages. Oops, zero-summing?

True_Liberal

Ahem...

"...commemoration of the Cafe's fifth-year anniversary."

From what little I recall of etymology, "fifth-year anniversary" is an outright redundancy. But the J-school majors seem to like it, even if we injunears don't.

And yes, Mike, I know many tax professionals will lobby against any tax simplification!

Mike

Should we reject a simplified tax code because it will put H&R Block out of business?

Good article.

Douglas

Randy,

One summary thought--anything that's free is worthless.

Douglas

Randy,

I disagree--I think the political class would love an inflation-free, generator of whatever we want. Most of them erroneously think they already have that device. Some call the device debt, others call it taxes, most call it both.

The free market is a little like free will: it's the playing field where you can live your life as you wish. It provides nothing, it produces nothing. Its nothing but an opportunity to assess costs and make decisions based on those costs.

But this idea opens up both political and religious issues. In Christianity, all justice must come at a cost, and without a cost the justice does not exist.

The political class always strives to find their replicator (hence going after the rich all the time), and the only noble action for the rest of us is to destroy the thing.

MERLIN

As an old free trader, but a scientist too, let me try to distinguish domestic and foreign trade. Change is costly for those displaced by new trade, and there are many attempts, some successful, at the state and lower jurisdictional levels to prevent trade from similar jurisdictions within the country. But why have tarriffs been so much more acceptable at the national level? As a starting point, I would note that bein part of a nation implies paying taxes to build infrastructure, enforce the laws, fend off foreign nations, and to invest in mastering the national culture. Much of this investment is sunk. I can move to a new city to take up my trade, even a new state, without abandoning my huge sunk investment, but if I have to move to another country with another culture and language and, as a non-citizen, face enormous legal impediments to reemployment, I am having to abandon my huge sunk investment. In most cases, it is efficient to stay in my orignial nation, retain my share of the massive public investment, and undertake possibly massive personal costs. In other words my adjusting to foreign competition is limited in some ways and therefore more costly. If I lose a leg in defending my country, A, from country B, now must I be subject to the dislocatiion of competition from B? Is there not more to the national bargain?

Crusader

Randy - even in the Star Trek universe there is scarcity(dilithium crystals, ore, etc..)

Randy

Imagine a truly paradigm shattering invention like a practical cold fusion energy box the size of a bath tub, or the replicator from Star Trek. Such a device would put nearly everyone out of work. Now imagine that instead of a single invention to put nearly everyone out of work, that we had a process that would eventually put nearly everyone out of work. We could call it... I don't know... how about a "free market"? The point? That the political class has an incentive to oppose both the device and the process, because either would make them obsolete.

Doug Murray

Douglas (not Bill),

From that angle, I agree.

Douglas

Doug,

What I mean is that the war against germs with vaccines is a matter of the state mandating vaccination to individuals. How it's funded doesn't really matter when the Supreme Court mandates you can't refuse government mandated vaccination (Jacobson 1902).

Sounds okay to most folks (even me in retrospect) but it has also created a more formidable strategy for how the germs mutate and attack.

Good, quick article on this over at City Journal:

http://www.city-journal.org/html/17_2_germs.htm...>

JP

Don -- My favorite of your posts is "Hosannas to the Force-Specialists," from June 23, 2005. I found it shocking the first time I read it, but I couldn't stop thinking about it.

Here's a little anniversary card: http://blackstoneinamerica.blogspot.com/2009/04...>

Doug Murray

Bill,

Not sure I understand the "socialist" claim. Another miracle of the polio cure is that it was done without government money. FDR did use the Bully Pulpit:

In the first half of the twentieth century, polio epidemics were a regular summer occurrence and in 1937 its most visible victim, the President of the United States, founded the National Foundation for Infantile Paralysis. Never shy about spending federal money on a good cause, Franklin Roosevelt declined to do so in this case, instead using his prominence and influence to raise private funding from large donors and small. When Dr. Jonas Salk (who I was privileged to meet in 1987) made his breakthrough and effectively ended this scourge within two decades, the Foundation financed most of his work.

From a post on my blog re stem cell research