To understand economics it is necessary only to grasp the two points – incentives matter, there are always opportunity costs. Grasp just those and you’ll be doing better than most people who actually work as economists.
An implication – a result really – of that second is that jobs are a cost, not a benefit. Human labour is a scarce resource – that’s why we’ve got to pay for it. There’s not enough of it to go around to do everything that we’d like to do with human labour. So, if we use it to do one thing then we cannot be using it to do some other. The cost to us of using human labour to do one thing is therefore the less of what we’d gain by it doing that other.
As Dominic Lawson is pointing out today:
The advocates of such a policy, especially on the Labour benches, say this is all good extra expenditure as it will create “millions of green jobs”. This is reminiscent of Soviet-style economic planning. It is based on the belief that the only thing that counts is output, and that productivity — actually the only thing that raises living standards — is irrelevant. It is like arguing it is better to build a motorway with spades, rather than mechanical diggers, as that would “create” hundreds of thousands more jobs. Better still, why not supply the workforce with spoons instead of spades? Then we would create millions more jobs. No matter that we would return to pre-industrial penury.
The UK currently has both the lowest unemployment rate and the highest employment to population ratio we’ve had since the Beatles were still recording in the same room as each other. We’ve not got any mass of spare labour just lying around. Thus if we go and create a million – just as an example – green jobs in renewables then we’ve got to take people away from what they’re currently doing.
Sure, some of them will be taken away from choking seals by forcing plastic bags down their throats, this will be a good thing. Others of them will be taken away from fixing the electrical systems in NHS hospitals which we might think to be a less good thing. Yet others will stop being diversity advisers, ballet dancers, Sure Start aides and train drivers. We lose all those outputs by shifting people over to hand crafting our electricity supply.
Hey, maybe it’s all a good idea? Absolutely everything does have an opportunity cost and what we’re looking for is the optimal answer, not the chimera that doesn’t have such costs at all. If the social cost of carbon were $1,000 per tonne CO2-e – it isn’t, Jim Hansen was wrong – then it might well be that we should have all that labour running renewables and bugger the diversity, dancing, fresh nappies and transport.
But that doesn’t change our basic fact here at all. Those jobs are a cost of renewables, not a benefit of our having them.
It really is true – jobs are a cost, not a benefit.