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workers are consumers, too

As the Democratic primary enters its fourth year, it’s as good as time as any to pay heed to the potential pitfalls of government intervention. Sure, it’s easy to see the appeal of the small local grocer and pharmacy over the Wal-mart behemoth. In addition, frustration with the destruction of local jobs, which has accompanied the gale of globalization and technological development, is understandable. But let us not ignore the benefits – and no, I don’t mean benefits that disproportionately benefit the most well-endowed with money and/or brains. Quite the contrary, some benefits concentrate in the lower economic strata, especially lower prices.

A recent article in the Economist documents the increasingly high cost of living in France, even when compared to (21st century) ally Germany: “A basket of identical items costs 30% more in France [than in Germany], says a study by La Tribune, a daily.” Efforts to inject greater competition into the marketplace have been stymied as “voters see competition through the eyes of producers—as a menace to jobs and factories—rather than consumers.”

Would you rather have the ~30 million Americans below the poverty line paying 30%+ for groceries to preserve the inefficient employment of a small subset of that population? The (il)logical conclusion of ‘producer preservation’ can be found in a story (lifted from Bryan Caplan article) about an economist who visits China under Mao Zedong. He sees hundreds of workers building a dam with shovels. He asks: “Why don’t they use a mechanical digger?” “That would put people out of work,” replies the foreman. “Oh,” says the economist, “I thought you were making a dam. If it’s jobs you want, take away their shovels and give them spoons.”

One of my favorites.


Filed under: Economic Policy

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