[ExI] Is unemployment the future?

Mirco Romanato painlord2k at libero.it
Tue Nov 3 16:23:10 UTC 2009

BillK ha scritto:
> The computer engineer who thinks we're doomed
> <http://news.cnet.com/8301-17852_3-10388726-71.html>

Maybe he is a computer engineer, but it is economically illiterate.
Ricardo's Law of Comparative Advantage is valid and will stay.

> It is worth pointing out that as at June 2009 over 35 million
> Americans were receiving food stamps, on a dramatically upwards
> pointing trend line.

Ask "Why"?
Technology is not the right answer.
Welfare is. Politics is.
Taxes are a way to prevent Ricardo Law to work. Regulations usually have 
the same effect.
If A and B are persons with different jobs and they are specialized, 
they perform better in their own job than in the other's job. So, if A 
have a need that can be satisfied by B, it is rational that A hire B to 
do it from him instead of do it himself. Say A is able to do A1 job with 
99% efficiency and B1 job with 50% efficiency. The reverse is true for B 
(B1 is 99% efficient and A1 is 50% efficient). A is better to work an 
hour and pay B for an hour of work for the B1 job and the reverse is 
true. Both gain from collaboration. This is without taxes.
Then arrive the government and ask, at gunpoint, both people 25% of 
their income.
Now A and B are only 75% efficient in their specialization (when working 
for others). A and B need to work 33% more to earn the same as before 
(this could be worth to do or not, but it is another problem).
Now in an hour A earn enough to pay B only for 45 minutes of work, so it 
need to work for 40 minutes instead of 30 to pay B. His comparative 
advantage to hire B is gone from 50% to 33% (and B is making less than 
before, as he only earn 75 and not 100 for an hour of work).
Move this to 33% taxation, so people need to work 50% more to earn the 
same and A have no more advantages to hire B as their productivity 
become the same.

Byproduct is lower wages for all and lower tax stream for the government 
and lower economical development, as people is forced to work in a less 
efficient way.

> (That's more than the whole population of
> Canada).

More than 1000 times the population of San Marino.

> And overall there has been no increase in the number of US
> jobs in the last ten years. So economic theory hasn't done terribly
> well recently.

How much economic theory do you understand?
And what?
Higher taxes and costs = lower employment and lower efficiency of the 
Higher subsides to unemployed = higher number of people that prefer to 
stay on the dole than working (legally).

> At least in Euroland we have the welfare state, so actual starvation
> and disease can be held at bay.

Don't appear that the US is doing much different from Europe.
And the welfare state of the former communists block didn't work well 
enough, anyway.
Economic development lagged more here than in the US in the last decades.
Now immigration and unfunded pension schemes and government debts are so
large that what is need is only a crisis to cause a real 
economic/political collapse (Argentina like).


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