[ExI] keynes vs hayek again, was: RE: 3d printers for sale

[Charlie Stross]

On 26 Aug 2012, at 12:05, spike <spike66 at att.net> wrote:

> 
> Thought experiment: take two big industrialized nations that make war stuff,
> such as the US and China, have them build an enormous naval fleet to go out
> into the middle of the Pacific and fight it out. 
...

>   All unemployed people will be
> taken in by something somewhere in this supply chain, even if they are
> perfectly useless:

...

> Instantly the unemployment rate drops from a stubborn 8% to nada, and the
> tax money is flowing like a waterfall,

Let me enumerate some of the ways this doesn't work.

Firstly: the definition of "unemployed people" is a movable feast, even if we examine people of working age. Is somebody in a hospital bed with locked-in syndrome unemployed? How about early-onset dementia? Or paranoid schizophrenia? Or someone with terminal cancer, or post-viral syndrome (some days they can work, other days they can barely get out of bed due to fatigue and muscle pain).

Yes, these are all medical examples. But medicine is a big part of social security in the civilized world.

How about people with personality disorders who you might not *want* to have working for you, as an employer? Do you really want to put psychopaths in a public-facing role? Or employ habitual thieves, or narcissistic managers? 

But let's dodge those issues. Let's look at "unemployment" figures. Essentially, an unemployment figure below 2.5% corresponds to 100% employment. Given average employment tenure of 3 years (or 150 weeks), 2.5% unemployment corresponds to 3 weeks per worker per average employment -- i.e. three weeks on average while changing jobs. If you want to reduce unemployment below 2.5% you're effectively reducing the liquidity of your labour market to the point where employers can't get enough bodies to fill all their niches.

If you look at the actual figures for employment in the developed world, the actual fully-utilized employment rate for people aged between 16 and 65 -- roughly, people of working age with full-time jobs that utilize their skills appropriately -- tends to peak around 50%. If this sounds low to you, consider parents with small children, people changing jobs, people pursuing higher education,  PhD's flipping burgers in McD's (they're certainly not fully employed, even if they're working 60 hours a week -- there are a LOT of people employed in jobs well beneath their training and abilities), people in jail (often for victimless crimes, or due to being picked up as a result of mental illness -- they need hospital beds, not jail cells), people in hospital, and so on. 

Frankly, any modern society needs some sort of social safety net in order to avoid murdering its population in windrows. We learned this the hard way during the industrialization process in the 19th century, and got a reminder course during the 1930s; seems we need to re-learn the lesson. The key problem is how to make a social security net that works humanely while minimizing its drag on the productive sector -- however we define that. (Are investment brokers who award themselves megadollar bonuses for throwing darts at a stock chart while blindfold "productive"? Our current system values them as such, regardless of outcomes ...)



-- Charlie