we can get exactly the same result for the woman by just having the government pay her $20,000 and let her do what she wants with it.
So what you're saying is, unproductive work is exactly as effective as tax cuts.
To be slightly less glib, it's not a $15,000 loss to the economy - that $15,000 is going to other people for taking care of her kids. Those people need to buy goods and services too. In fact, making her spend $15,000 on child care could in theory be better for the economy than just giving her a $20,000 check, because she might just save the $20,000 for later (with a total income of $50K, that's unlikely, but still).
Any time the government uses capital or labor to do unproductive work, we can always make the transaction better for all involved by simply transferring the money that would have been spent on that capital or labor directly to the beneficiaries.
You say better, but you only mean having a more streamlined process. It's exactly as effective, economically. It just seems kludgy and wasteful. The downside to simply moving everything unproductive to tax cuts is legislative - you have to go through the bill and decide what is unproductive, and then decide what taxes to cut instead of doing the unproductive spending. Ideally, however, you'd take the unproductive work and replace it with something productive, because, as you say, there's a much higher net gain in the economy when productive work is done. The net gain in the economy in your second example is actually much higher than $20,000, since that $15,000 goes back into the economy.
In fact, I'm going to take your last sentence and modify it a bit - "Any time the government sends money directly to the beneficiaries, we can always make the transaction better for all to use that money to buy labor and capital for productive work." After all, that's what your second example shows.
Yes, it is. That $15,000 worth of her time is gone, she does not get to enjoy it, it is a deadweight loss. There is no compensating benefit. She is spending $15,000 on child care, yes. If she had just been given the money instead, that $15,000 still would have been spent somewhere, and she would still have the value of her time, which is worth $15,000 to her.
No, she wouldn't. Any time that she'd be paying for child care would have been time that she'd be taking care of her kids.
True, the $15,000 would be spent somewhere else (unless she saves it, which is more likely with a big check), but either way it's going back into the economy.
It's true that she'd probably rather spend time with her kids than copying encyclopedias, but time with her kids stimulates the economy just as much as copying encyclopedias, which is to say, not at all. It's better for her if she simply gets a check, but in terms of the economy, it doesn't matter.
It's better for her if she simply gets a check, but in terms of the economy, it doesn't matter.
Huh? Do you have an alternate conception of the economy in which the 'economy' is independent of the outcomes of the people that make up the economy? She is worse off by $15,000, nobody else is better off, ergo the economy as a whole is worse off by $15,000.
And the people who sell the TV that she would have bought if she hadn't have had to buy child care are worse off by exactly the same amount. Shifts in her spending patterns don't change the accounting.
And before you retort that if she would have just socked the money away in the bank, there's no loser, let me point out that saving the money increases the money supply for borrowing, bidding down the interest rate, inducing other consumption in the economy (which, at a fixed money supply, will turn into $15,000 spending somewhere else).
I'm going to back up here and state what I see as some fundamental definitions/assumptions (laws?) concerning the economy. Somewhere in here there's got to be a fundamental assumption I'm making that you disagree with, because I don't understand how it can possibly be "good" to pay for hand-copied encyclopedias in order to "stimulate the economy." So please tell me what part of the following you disagree with.
When we speak of an "economy", we are referring to the sum total of all wealth, the potential to create more wealth, and the security of that wealth. By wealth, I mean any good or service that people personally value. These include all the standard physical objects we trade with each other, buildings/bridges, trade networks, etc. Information and education are significant forms of wealth, allowing us to both maximize the way we produce goods and to correct inefficiencies either through better division of labor or development of labor-saving devices (i.e., technology). Security is a form of wealth, be it physical security that allows us to live our lives without fear of mugging/physical harm, financial security that allows us to invest money in the bank or in companies without fear that it will be stolen or rendered inaccessible, etc. There's also the wealth of a good legal system, which would do little to hinder the natural productivity of a free market, and have very clear, specific, and understandable long-term laws to establish the "rules of the game" by which people can maximize their productivity. Leisure is also a form of wealth, and we are wealthier when we have more of it due to labor-saving devices. Human labor and natural resources are sort of like "wealth", but not quite. That is, they represent potential wealth but are worthless in and of themselves unless they are put to use creating other forms of wealth. I'm sure there's other forms of wealth I haven't listed here, but you get the idea.
That which is "good" for the economy is defined as that which increases wealth (or the potential to create more wealth), while anything "bad" is that which decreases wealth.
Therefore, a "job" is only "good" for the economy if it increases wealth. Since a job of hand-copying encyclopedias or "digging holes and filling them up again" uses human labor to perform a task that no one wants, one has not done anything to increase wealth. In fact, one has wasted a resource, human labor, in the process. If you stipulate that the government must pay these people, I would say it is better to pay them to stay home than to do a worthless task. In fact, I'd say that if only 10% of this hypothetical group used the time to read a non-fiction book or to help their kids with their schoolwork, at least that would increase overall wealth by adding to the education of the labor pool.
You don't seem to agree with my conclusion. What I can't figure out is which of these assumptions or what part of this analysis you therefore reject.
Brett and I have sort of come to the conclusion that it's because "there exist people who want a job badly enough that the value of their leisure time to them is negative as long as they don't have a job."
As I said somewhere... else (gah, this is a long thread), this economic analysis doesn't apply all the time. Under good economic circumstances, it's idiotic to have the government make useless work. It's also idiotic to provide tax cuts during that time, though it's more idiotic to have them do useless work.
In these economic conditions, when the unemployment rate is high, it's possible to increase the net value of the economy by turning a negative value into zero - which can be accomplished with a useless job or a tax cut. Is it better to turn a negative value into a positive one? Of course. That's why productive work is best to stimulate the economy.
So what you're saying is, unproductive work is exactly as effective as tax cuts.
To be slightly less glib, it's not a $15,000 loss to the economy - that $15,000 is going to other people for taking care of her kids. Those people need to buy goods and services too. In fact, making her spend $15,000 on child care could in theory be better for the economy than just giving her a $20,000 check, because she might just save the $20,000 for later (with a total income of $50K, that's unlikely, but still).
Any time the government uses capital or labor to do unproductive work, we can always make the transaction better for all involved by simply transferring the money that would have been spent on that capital or labor directly to the beneficiaries.
You say better, but you only mean having a more streamlined process. It's exactly as effective, economically. It just seems kludgy and wasteful. The downside to simply moving everything unproductive to tax cuts is legislative - you have to go through the bill and decide what is unproductive, and then decide what taxes to cut instead of doing the unproductive spending. Ideally, however, you'd take the unproductive work and replace it with something productive, because, as you say, there's a much higher net gain in the economy when productive work is done. The net gain in the economy in your second example is actually much higher than $20,000, since that $15,000 goes back into the economy.
In fact, I'm going to take your last sentence and modify it a bit - "Any time the government sends money directly to the beneficiaries, we can always make the transaction better for all to use that money to buy labor and capital for productive work." After all, that's what your second example shows.
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Yes, it is. That $15,000 worth of her time is gone, she does not get to enjoy it, it is a deadweight loss. There is no compensating benefit. She is spending $15,000 on child care, yes. If she had just been given the money instead, that $15,000 still would have been spent somewhere, and she would still have the value of her time, which is worth $15,000 to her.
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No, she wouldn't. Any time that she'd be paying for child care would have been time that she'd be taking care of her kids.
True, the $15,000 would be spent somewhere else (unless she saves it, which is more likely with a big check), but either way it's going back into the economy.
It's true that she'd probably rather spend time with her kids than copying encyclopedias, but time with her kids stimulates the economy just as much as copying encyclopedias, which is to say, not at all. It's better for her if she simply gets a check, but in terms of the economy, it doesn't matter.
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Huh? Do you have an alternate conception of the economy in which the 'economy' is independent of the outcomes of the people that make up the economy? She is worse off by $15,000, nobody else is better off, ergo the economy as a whole is worse off by $15,000.
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The people who take care of her kids are better off by $15,000.
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No, I don't, and no, it isn't. Turning valuable labor and resources into nothing destroys wealth, and that makes the economy poorer.
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When we speak of an "economy", we are referring to the sum total of all wealth, the potential to create more wealth, and the security of that wealth. By wealth, I mean any good or service that people personally value. These include all the standard physical objects we trade with each other, buildings/bridges, trade networks, etc. Information and education are significant forms of wealth, allowing us to both maximize the way we produce goods and to correct inefficiencies either through better division of labor or development of labor-saving devices (i.e., technology). Security is a form of wealth, be it physical security that allows us to live our lives without fear of mugging/physical harm, financial security that allows us to invest money in the bank or in companies without fear that it will be stolen or rendered inaccessible, etc. There's also the wealth of a good legal system, which would do little to hinder the natural productivity of a free market, and have very clear, specific, and understandable long-term laws to establish the "rules of the game" by which people can maximize their productivity. Leisure is also a form of wealth, and we are wealthier when we have more of it due to labor-saving devices. Human labor and natural resources are sort of like "wealth", but not quite. That is, they represent potential wealth but are worthless in and of themselves unless they are put to use creating other forms of wealth. I'm sure there's other forms of wealth I haven't listed here, but you get the idea.
That which is "good" for the economy is defined as that which increases wealth (or the potential to create more wealth), while anything "bad" is that which decreases wealth.
Therefore, a "job" is only "good" for the economy if it increases wealth. Since a job of hand-copying encyclopedias or "digging holes and filling them up again" uses human labor to perform a task that no one wants, one has not done anything to increase wealth. In fact, one has wasted a resource, human labor, in the process. If you stipulate that the government must pay these people, I would say it is better to pay them to stay home than to do a worthless task. In fact, I'd say that if only 10% of this hypothetical group used the time to read a non-fiction book or to help their kids with their schoolwork, at least that would increase overall wealth by adding to the education of the labor pool.
You don't seem to agree with my conclusion. What I can't figure out is which of these assumptions or what part of this analysis you therefore reject.
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As I said somewhere... else (gah, this is a long thread), this economic analysis doesn't apply all the time. Under good economic circumstances, it's idiotic to have the government make useless work. It's also idiotic to provide tax cuts during that time, though it's more idiotic to have them do useless work.
In these economic conditions, when the unemployment rate is high, it's possible to increase the net value of the economy by turning a negative value into zero - which can be accomplished with a useless job or a tax cut. Is it better to turn a negative value into a positive one? Of course. That's why productive work is best to stimulate the economy.
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