It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Tuesday, June 3, 2008

Jobs as Cost vs Jobs as Benefit

"Tidal" points out that Tony Juniper, described in his bio as "director of Friends of the Earth", has an article up on the Guardian site called "It's the Economists, Stupid". While the article is nowhere near as broad as I would have hoped, it raises a couple of interesting points for me.

First, you see the blustery assertion that [Juniper] was "economically illiterate if not actually innumerate." I have been getting a fair amount of this noise around here and I don't care for it. Yet my field stands accused of arrogance. Note that we have been trying for years to point people to the evidence, rather than going directly to bluster as a first recourse.

How peculiar.

Moving on to the specific topic, I find myself particularly baffled. Here is Juniper:

He went on to say that "When people have jobs they get paid for doing them. Jobs created are therefore a cost of such schemes. If we are creating more jobs then it's very difficult indeed to see how we're doing whatever it is for less money."

Powerful claims based on interesting logic that will be very familiar to many environmentalists. But let's unpack it a bit.

Of course, jobs are a cost, but it is not difficult to see how we could generate power with more jobs and for less money. One way is to set out policies that will lead to more jobs while avoiding other costs, such as storing nuclear waste, mining uranium or cleaning up after the effects of climate change. Another way to see how it could happen is by creating jobs in sectors that reduce costs, such as in energy efficiency programmes. Not so hard to see, when you think about it for a minute.

In other words, he accepts the idea that "jobs are a cost" but tempers it with the idea that there may be balancing costs reduced elsewhere.

This has been a long-standing bafflement for me. I am ignorant and confused on this matter. I assure you I am not willfully ignorant and confused; I just want to see an answer that makes some sense to me.

Admittedly, if a company needs more security guards, that is a cost: a declining security environment places demands on the corporate resources, and it's paid with extra staff who don't contribute to production or profit but are a pure cost center.

On the other hand, if a society raises more taxes and hires more policemen, that is not to first order a cost. Many people experience a small demand on their taxes, but in exchange a few people who would otherwise be unemployed have jobs. In the total, the society is redistributing wealth (and responsibilities) and not expending anything (beyond, perhaps, the vehicles and uniforms and such, but note that those are provided by human vendors...)

To be sure there are some arguments within conventional economics saying that any subsidy is worse than the free market, but the fact is that this is marginal; despite all the huffing and puffing, the disutility of a given subsidy is in most cases tiny compared to the cost of the subsidy.

It also seems to me that the contextual improvement in utility from subsiudies are simply ignored in the analysis that claims to show all subsidies are bad. Individual preferences for guns and butter are distorted by subsidy, but the costs and benefits of having more butter and fewer guns in the environment are not included in the model. Which is why, despite the protestations of the most ideologically committed, we have public security forces after all.

In short, I don't get it. The total cost of a totally non-productive job seems so small that I wonder if it wouldn't make sense to just hire everyone who wants a job into the public sector even in the most marginally productive of activities. Wouldn't this make us all better off just by reducing uncertainty and increasing wealth (the collective benefit)?

Yet Juniper and his accuser seem agreed that all else equal jobs are a big net cost. Now neither of them have any claim to expertise, but I have been puzzled about this very question for a long time, and now that I have a few dozen clever people's attention I thought I'd see what you all have to say.

I will note that practically every public works project I have ever heard of has had opponents talking about "cost" and proponents talking about "new jobs" and "stimulating the local economy", as if they weren't talking about pretty much exactly the same thing, with one side slapping a minus sign onto it.

I suppose I am missing something important here. I'd really like to know what.

Suppose I concede once and for all the point that I am ignorant, and even lazy. I don't think my readers are interested in further discussion of that point. Telling me I am lazy and stupid to ask the question is not a useful contribution. I have already conceded that point. I am too stupid to figure it out for myself. I am too lazy to read many volumes of dense reasoning in the hopes of getting a coherent answer to this particular point of confusion, never mind the half dozen other ones that bother me about economics.

I just haven't raised this particular confusion lately. (I think I may have brought it up on usenet sci.environment an eon or two ago.) If you are feeling generous, please let us know what the thinking is, conventional or otherwise, on this matter. A substantive argument on any side of this question (more jobs good, more jobs bad, more jobs neutral) would be welcome.


Dano said...

I tend to avoid comments in Murrican papers, especially on environmental issues [too many comments of the stripe GLOBUL WARMINS A SCAY-UM], but the comment by Swiss Bob is instructive, in that it is sort of a post-neoliberal excuse for not properly valuing environmental services. Interesting rhetoric.



tidal said...

ya know?... I kinda regret linking to the guardian article, since it really was just a way to point to the Costanza thingamajig...

but wrt to "jobs" as 'cost' or 'benefit'... the putative cause of the dispute between Tony Juniper and his antagonist...

They are really arguing past each other...

Juniper asserts that profitable new businesses - by definition, if profitable - create net benefit to society, including the jobs, presumably...

Worstall argues that those jobs (and other resources) diverted to any new business that needs any form of intervention into current business-as-usual suggests a net loss of welfare since - dontcha know - the market is already getting it right (given already existing over-intrusion into the market by gubamint...)

Example... need engineering skill to implement new windfarms en masse? That skill set might be already largely employed at Drax? Aren't we "double counting" those jobs as we shift from one deployment to the other????

Look. They arguing about two things, not one. They are arguing about the efficiency of markets to "get it right". And they are arguing about what - if anything - to do if the markets seem to missing something... like the impact of lifetime carbon released when Henry Ford rolled the first Model T off the line.... 1,000 years hence...

Worstall, by the way, does not believe in the scientific case for climate change mitigation, so he would see any carbon price (or other) intervention as interference in the - presumably already optimized! - market...

I could scribble more, but the intent of my original link was actually about "substitutability" between natural and human-made capital... but mom told me that if I make a mess, I should at least try to help clean it up!!

The larger context of your question mt? Well, it's pretty large... that's for sure!

James Annan said...

"The total cost of a totally non-productive job seems so small that I wonder if it wouldn't make sense to just hire everyone who wants a job into the public sector even in the most marginally productive of activities."

And who would be left to do the real work that grows the food that you eat and makes the computer that you type at?

The person employed by such job-creation schemes is thereby unable to do anything else productive with their time. Of course, there are those who were not doing anything productive anyway, but I hope that we are a minority :-)

In Japan, a lot of the otherwise unemployed are given pointless jobs waving wands around roadworks, or standing beside the ATM in a bank to tell you which slot to put your card in (and no, I'm not exaggerating on either score). If the alternative for these people really is sitting at home on welfare, then I agree the net cost is pretty negligible, but even here these people could have been growing potatoes in their allotments (well, not in Japan where there is no space, but you get the idea).

Dano said...

To the issue wrt Costanza's impact on NPP and James' point about employing people, Wendell Berry has a book entitled "What are People For?"

That is: do we treat them like units of productivity, to be schlepped around to maximize output, or should we treat them like people that have worth?

The overarching issue is rising human population and consumption on the planet's ability to provide services, as Ehrlich succinctly explains here, when asked What is the key limiting factor for human development?

When population and consumption is kept in mind wrt jobs, a job per se is neither good nor bad, as the impact of the person on the biosphere is already there.

Just a thought.



Frank O'Dwyer said...


You may find the parable of the broken window helpful in understanding what they are on about.

Although, it really depends on how accurate you consider that analogy to be - i.e. is a particular 'green job' on some level 'cleaning up the mess', or is creating value in its own right.

Or put it another way, if green jobs are NOT a cost, then that would seem to entail the conclusion that wrecking the environment is a good thing, as long as we all pay someone else to clean up after! It creates jobs!