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Tuesday, October 30, 2012

VDH describes Krugman and his kind

VDH on the naive and ignorant mindset of the left-liberal elite
In the elite liberal mind, there is instead a sort of progressive Big Rock Candy Mountain. Gasoline comes right out of the ground through the nozzle into the car. Redwood 2x4s sprout from the ground like trees. Apples fall like hail from the sky; stainless steel refrigerator doors are mined inches from the surface. Tap water comes from some enormous cistern that traps rain water.  Finished granite counter tops materialize on the show room floor. Why, then, would we need Neanderthal things like federal gas and oil leases, icky dams and canals, yucky power plants, and gross chain saws — and especially those who would dare make and use them? 

For some, especially those who are well-educated and well-spoken, a sort of irrational furor at “the system” governs their political make-up. Why don’t degrees and vocabulary always translate into big money? Why does sophisticated pontification at Starbucks earn less than mindlessly doing accounting behind a desk? We saw this tension with Michelle Obama who, prior to 2009, did not quite have enough capital to get to Aspen or Costa del Sol, and thereby, despite the huge power-couple salaries, Chicago mansion, and career titles, felt that others had far too much more than the Obamas. “Never been proud,” “downright mean country,” “raise the bar,” etc., followed, as expressions of yuppie angst. The more one gets, the more one believes he should get even more, and the angrier he gets that another — less charismatic, less well-read, less well-spoken — always seems to get more. 

So do not discount the envy of the sophisticated elite. The unread coal plant manager, the crass car dealer, or the clueless mind who farms 1000 acres of almonds should not make more than the sociology professor, the kindergarten teacher, the writer, the artist, or the foundation officer. What sort of system would allow the dense and easily fooled to become better compensated (and all for what — for superfluous jet skis and snowmobiles?) than the anguished musician or tortured-soul artist, who gives so much to us and receives so much less in return? What a sick country — when someone who brings chain saws into the Sierra would make more than a UC Berkeley professor who would stop them.
And lest you think he exaggerates about the inability of the left-liberal to understand concepts as basic as where things come from, consider this recent offering from Paul Krugman, among the most elite members of the left-liberal community.
Both Dean Baker and Josh Bivens weigh in Robert Samuelson’s outburst at the New York Times for saying that the government can too create jobs. (He went so far as to call it “flat-earth” thinking). Sadly, Samuelson’s attitude is widely shared — even, at least rhetorically, by Barack Obama.

So let me not focus on Samuelson’s piece so much as on the general proposition. What can it possibly mean to say that only the private sector can create jobs?

It could mean that government jobs aren’t “real” jobs — presumably that they don’t supply something of value to society. Samuelson disavows that position, I think — and rightly so. After all, the bulk of government workers are in education, protective services, and health. Do you really want to say that schoolteachers, firefighters, and nurses provide nothing of value?
What Samuelson is saying, what hundreds of economists have recognized for literally centuries, is that schoolteachers, firefighters and nurses PRODUCE nothing of value.  This should be obvious, because none of them PRODUCE anything at all.  Think about it.  Suppose that everyone was either a schoolteacher, a firefighter, or a nurse.  How much wealth would be collectively produced by them?  Absolutely nothing.

Schoolteachers, firefighters, and nurses are all societal luxury goods.  They are costs, at most they may allow for the leveraging and development of more efficient productive laborers, but in themselves, they produce absolutely nothing.  Their productive value is zero.  This is something that can be easily observed by anyone who has ever seen someone teaching, firefighting, or nursing.  And yet, the most elite of the elite left-liberals genuinely cannot grasp this.  Nor is he the only one, as Baker and Bivens demonstrate.  Samuelson is too kind when he mocks them as flat-earthers.  At least the flat earthers can reasonably observe that the earth looks flat from their vantage point.

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195 Comments:

Anonymous Josh October 30, 2012 10:59 AM  

This is the same liberal mindset that castigates hunters for killing animals for food instead of getting it from the grocery store.

Honestly, liberals never realized that college/hogwarts wasn't the real world.

Anonymous asdf October 30, 2012 11:00 AM  

Your hate is blinding you man. How many trees are you going to chop down if nobody stops forest fires? How many acres are you going to plow when nobody has educated the engineers to make your equipment? How are you going to go to work if your too sick because you got no medical care?

It's fine and dandy to say some of these jobs can be done more efficiently, but "no value". You're getting fetishistic here.

Anonymous Rantor October 30, 2012 11:12 AM  

asdf,

you are truly clueless. There is no hate for Firemen, Nurses, or Teachers, there is recognition that they are not part of the productive classes. They cost money and in the end deliver no tangible goods. If the productive classes want their services, they will pay for them. And today they do, whether by school tuition, property taxes, income taxes, insurance or directly (many private concerns have their own fire departments, my company has its own nurses.)

Anonymous Daniel October 30, 2012 11:13 AM  

No value, asdf, doesn't mean what you think it does. It isn't a fetish, it is observable economics, not just Econ 101, but Econ 101 CHAPTER ONE.

Tell me, what is the product of a firefighter?

Anonymous Stephen J. October 30, 2012 11:14 AM  

I'll note to ASDF above that Vox said that these roles had no *production* value, not *no* value.

Let us grant for the moment that *direct* production value of the roles you mention may be zero, in that none of them physically bring into existence a being, object or system which did not exist before. How would you address the claim that these roles provide great *indirect* production value by virtue of (a) training people who *will* be producers in the skills needed for that production; (b) protecting produced property from destruction by fire; (c) protecting productive citizens from the production-impairments of illness?

More broadly, are there measures of socioeconomic value other than "productivity"? If so, what are they, and how do you differentiate their value from "productive value"?

Anonymous harry12 October 30, 2012 11:16 AM  

.
Don't forget... Krugman has credentials!

/s

Blogger swiftfoxmark2 October 30, 2012 11:19 AM  

I once debated a conservative on a forum, from which I am now banned, where I stated in plain terms that nothing the government pays for is productive. It is merely wealth redistribution, which is why so many politicians believe in such a silly concept.

He didn't believe, citing defense contractors as a great example of production. Too bad he's too dumb to see that they have done next to nothing in the past several decades yet continue to eat up taxpayer dollars. Hell, I've heard stories that there are software developers who worked for a defense contractor for decades and haven't deployed a single line of code.

Anonymous VryeDenker October 30, 2012 11:20 AM  

Unless your government sells goods and services to another country at a profit, it cannot be deemed a producer of wealth.

There is a nice analogue to this in a large company with semi-autonomous departments like the large media-house I worked for: we made our money largely from advertising on our web sites and in our newspapers. I was in one of the development teams called the "Core team" who developed the content management system. we would bill the various sites and magazines for any development to their sites and infrastructure. We could in turn pay for the services of the graphic design department, et cetera ad nauseum. The only point at which the parent company actually got in any real revenue was when we sold ad space and print copies, yet all the departments had their own income and expense sheets reflecting their share in the "funny money".

Blogger vandelay October 30, 2012 11:24 AM  

You're right about their productive value, and I see what you mean about firefighters, schoolteachers and nurses being societal luxury goods.

But I assume that you do grant that government is able to produce jobs of value to society, full stop, right?

Anonymous Roundtine October 30, 2012 11:28 AM  

Liberals completely ignore the concept of marginal product, including Krugman. They could argue that firefighters, police and nurses do produce an intangible public good, but this public good is satisfied with a very small number of workers, defeating their argument. Hiring more of them obviously adds nothing to production and doesn't even meet the marginal cost of employing them. They fundamentally understand it in another way, because they never talk about the firefighter or police gap versus China. China also has very crowded classrooms (I've seen 80 students to 1 teacher) and yet surpass U.S. results. Maybe the U.S. needs fewer teachers.

Anonymous Noah B. October 30, 2012 11:31 AM  

Such people are blind to the fact that in order to become wealthy, you must produce a thing or a service that other people want. Their mentality is ultimately rooted in selfishness -- they want to choose what they do and force other people to pay them what they think they're worth.

Anonymous The One October 30, 2012 11:37 AM  

Vandelay, many on here would say a close no. A cop spying on me with a drone, a teacher teaching my future kids about where to put a condom. I'll take the 2nd amendment and homeschooling. Firefighters are volunteer where I live. Maybe judges and a military that actually secures the border are of "value"

Anonymous Josh October 30, 2012 11:38 AM  

Such people are blind to the fact that in order to become wealthy, you must produce a thing or a service that other people want.

Or be a bankster criminal

Anonymous Procol Harumph October 30, 2012 11:39 AM  

"How many trees are you going to chop down if nobody stops forest fires?"

If nobody stopped forest fires, then there would be a lot MORE TREES!!

You clearly understand nothing about forest ecology, you're just being sentimental. When the Europeans arrived in North America, the place was carpeted from coast to coast in TREES!! The Native Americans had not been "stopping forest fires", in fact, due to primitive slash-and-burn agriculture techniques, they went around SETTING forest fires! And yet, mysteriously, the place was thick to the gills with... trees!

Why?

Have you ever thought about this?

Anonymous VryeDenker October 30, 2012 11:40 AM  

China also has very crowded classrooms (I've seen 80 students to 1 teacher) and yet surpass U.S. results. Maybe the U.S. needs fewer teachers.

There are three main differences:
1. Chinese schools don't have vast numbers of non-Chinese speaking* students.
2. If you act out in a Chinese school, you have your ass handed to you by the teacher.
3. If you don't perform, you have your ass handed to you by your parents.

*mandarin, cantonese, etc.

Anonymous RedJack October 30, 2012 11:42 AM  

When you get down to it, there are VERY few actual producers in the economy. By that I mean people who produce actual wealth.
Teachers, cops, soliders, bankers, etc. don't produce anything. That doesn't mean the services they provide are worthless, but that they are, by definition, not producing.

It is a very hard concept for most modern people to grasp.

Anonymous DrTorch October 30, 2012 11:45 AM  

I think a lot of people intuit what VDH wrote (I think he copied some of my writings though), but schools educate that logic out of their heads. Because

1. Teachers don't get it, and

2. Teachers don't want to accept that they aren't part of the productive class.

Anonymous Daniel October 30, 2012 11:45 AM  

vandelayBut I assume that you do grant that government is able to produce jobs of value to society, full stop, right?

No. Government is, by definition, not a producer. It has no product. Nothing is on a shelf. Nothing is exported on freight, or sold and transmitted digitally for a profit.

Full stop. Government doesn't produce. It subsidizes through taxes and the tax code. Government jobs are not products. The jobs themselves do not produce products.

Your terminology, at best, is unclear. If your question is can the government, as a taxpayer and debt-funded entity, employ people who provide luxury services that are transacted, and therefore, at some natural or artificial price matrix, in demand, then the answer is "yes."

Anonymous VryeDenker October 30, 2012 11:46 AM  

The point is not so much that teachers, et al don't produce anything. It is more accurately that the money government pays them with is not earned via the sale of goods, but rather from legalised theft(taxation). Government is an NPO that everyone is forced to tithe to.

Anonymous VD October 30, 2012 11:46 AM  

How would you address the claim that these roles provide great *indirect* production value by virtue of (a) training people who *will* be producers in the skills needed for that production; (b) protecting produced property from destruction by fire; (c) protecting productive citizens from the production-impairments of illness?

I would point out the obvious difference between "potential indirect production value" and "actual indirect production value delivered" as well as the need to calculate whether "actual indirect production value delivered" exceeds the costs required to provide that indirect value delivered. If the costs exceed the value delivered, they are a net negative and society would be better off without them.

Then I would point out that Krugman's question concerned if these unproductive jobs "provide nothing of value" or not, it said nothing about whether there may be some subjective value to be found in their services. The observable fact of the matter is clear. They provide nothing of value in the context Samuelson was considering the matter.

Anonymous Josh October 30, 2012 11:47 AM  

Those that break the greatest numbers of windows, like hurricanes, tsunamis, tornadoes, and earthquakes, create the most value.

All hail our natural disaster overlords!

Anonymous vanchandler October 30, 2012 11:50 AM  

"Schoolteachers, firefighters, and nurses are all societal luxury goods." - I agree, but I also pose this question as a writer myself. Is my skill a luxury or necessity? I'd like to think of it (considering my style and focus of writing) as a kind of necessity, as more of a thinker and historian of morality than a mere collector of words. Is my skill (and yours, Vox, for that matter) more valuable to society than, say, that of a firefighter?

Anonymous VD October 30, 2012 11:50 AM  

I assume that you do grant that government is able to produce jobs of value to society, full stop, right?

I grant nothing of the sort. Most certainly not. All government can do is create malinvestment by interfering with the supply and demand mechanisms. This will create jobs, but by definition, the jobs will be of less value to society than if the mechanisms were left alone.

Anonymous Daniel October 30, 2012 11:50 AM  

This is why all the effete intellectuals bend toward Marxism. They envy the producer they can't possibly hope to understand. It's like the Fantasy Football guy who is pissed off he was passed over for Ted Thompson, when everyone knows very well he ought to be the GM of the Packers.

Anonymous VD October 30, 2012 11:52 AM  

Is my skill a luxury or necessity? I'd like to think of it (considering my style and focus of writing) as a kind of necessity, as more of a thinker and historian of morality than a mere collector of words. Is my skill (and yours, Vox, for that matter) more valuable to society than, say, that of a firefighter?

It is clearly a luxury. Artists have always been luxuries; strategy games like Civ even reflect this. My skills are not limited to writing. I am a designer. I quite literally produce things.

Anonymous Noah B. October 30, 2012 11:53 AM  

"Or be a bankster criminal"

Guess you've got me there, Josh.

Anonymous Daniel October 30, 2012 11:55 AM  

"Schoolteachers, firefighters, and nurses are all societal luxury goods." - I agree, but I also pose this question as a writer myself. Is my skill a luxury or necessity? I'd like to think of it (considering my style and focus of writing) as a kind of necessity, as more of a thinker and historian of morality than a mere collector of words. Is my skill (and yours, Vox, for that matter) more valuable to society than, say, that of a firefighter?

You are confusing all your terms, as far as I can tell, especially value.

A writer produces the content for a book which is a sold good. That is a producer.

A firefighter prevents and extinguishes accidents which damage products. That is NOT a producer.

Blogger vandelay October 30, 2012 11:59 AM  

This will create jobs, but by definition, the jobs will be of less value to society than if the mechanisms were left alone.

So government CAN create jobs of value, just not jobs of optimal value.

Anonymous Roundtine October 30, 2012 12:03 PM  

Liberals are really hung up on IQ and money, except when the IQ/income distribution reaches extreme points, like Corky in Life Goes On. I never heard a liberal rant about that guy, but then again he's an actor, so......

Anonymous Noah B. October 30, 2012 12:09 PM  

"So government CAN create jobs of value, just not jobs of optimal value."

On rare occasions, government does create jobs of high value in a way that the private sector cannot. Judges are a good example in that they need to be accountable to the public. As a defendant, one does not typically have the luxury of choosing their judge. With nurses and teachers, in most cases, there's no reason people could not select a nurse or teacher in a free market. Everyone except those teachers and nurses whose salaries are artificially increased by government intervention would be better off.

Anonymous Roundtine October 30, 2012 12:10 PM  

So government CAN create jobs of value, just not jobs of optimal value.

Blind squirrels can find nuts. The government for the most part, if it creates a productive job, is replacing a private sector job that their taxes/regulations destroyed. When you consider all the jobs government "creates" today, it's a net loss for society.

The economy is sufficiently inefficient that there are places where government can create productive jobs, but government is more inefficient than the broader economy. If we're talking about someplace like Singapore, than I'll set theory aside and entertain a practical argument. Otherwise, it's the old information problem of central planning.

Blogger Joshua_D October 30, 2012 12:19 PM  

vandelay October 30, 2012 11:59 AM

This will create jobs, but by definition, the jobs will be of less value to society than if the mechanisms were left alone.

So government CAN create jobs of value, just not jobs of optimal value.


Maybe. But, the fundamental issue lies in determining the "value", whether optimal or not, in the first place. How do you or I know if a service the government provides is seen as valuable? Since governments services operate under a monopoly, there is no competition and no price discovery, so there is no way to determine if people subjectively value the government service or not.

For example, if people had to directly pay a bill for local school teachers, then we'd discover very quickly whether local school teachers were valued, or not.

Blogger Galt-in-Da-Box October 30, 2012 12:26 PM  

TOT:
White Person's Guide To Successful Breeding
(Or HOW TO AVOID not showing up for the future) - a matter of great concern to those of US in the Baby BUST generation:

1. Seek out people who make you feel good and are fun to be around.

2. If you don't personally know any of these, plenty can be found at a neighborhood pub.

3. Soak in the atmosphere along with liberal allotments of your favorite beer, wine or liquor (budget a sizable amount of money for this part of the project).

4. Crack jokes and generate an "life of the party" atmosphere.

5. Remenber the appearance of the female is not particularly important as long as her ovaries work & she's cooperative in the rearing process.

6. When engaged in conversation with same, toss plenty of sugary shit like "I'm studying to become a child phychologist/caretaker" or "my great grandad's loaded & about to kick the bucket, and I'm first in line to collect" into the mix to sweeten the pot: Money may make the world go around, but bullshit is the axle on which it turns.

7. Forget the condom before going any further.

8. Make sure you are still sober enough to accomplish the mission once the opportunity arrives (where I usually fuck up) and, as Bubba sez, "git 'er DUNN"!

This may conflict with your personal ethics, but remains the method most widely utilized - feel free to modify accordingly!

Anonymous Stephen J. October 30, 2012 12:34 PM  

Vox: "I would point out the obvious difference between "potential indirect production value" and "actual indirect production value delivered" as well as the need to calculate whether "actual indirect production value delivered" exceeds the costs required to provide that indirect value delivered. If the costs exceed the value delivered, they are a net negative and society would be better off without them."

So far so good; the problem, of course, is that the difference between potential and actual value is either 20-20 hindsight (when looking back at unrecoverable costs) or an informed wager at best and a wild-ass guess at worst (when looking forward to decide how to allocate costs). To all rational appearances the costs of the Manhattan Project wildly exceeded its value delivered, right up to the moment the Trinity test went off successfully; what would have happened had the desperation of wartime not trumped rational cost-benefit assessment?

And it is also worth noting that ultimately the definition of "value" is subjective, and has to be an input *into* a cost-benefit analysis rather than something we can expect to derive *from* it. Krugman, I suspect, wants to establish the difference between "production quotient" and "social value" with an aim to shoring up government-employment functions as unquestionably contributing to the latter, such that it becomes difficult to make the case for the dispensability of any particular function.

Anonymous JohnS October 30, 2012 12:36 PM  

@asdf-
None of the jobs mentioned need to be done by The State.

Remember how all the trees in America burned up before there was a dept. Of the Interior & EPA (and state fish and game, ect)? Me either.

Do you really think the blacksmiths that previously made the plows went to "engineering" school?

Medicine has gotten to the sorry state it's in largely thriugh government interference as well.

Medicine i'll give you partial credit for

Anonymous 691 October 30, 2012 12:38 PM  

In principle, firefighters may not produce anything per se, but they clearly add to net total stuff by limiting the extent of damage by fire. Same for nurses/doctors who prevent excessive damage/death from disease and injury. Life is not a luxury good.

Anonymous Matt October 30, 2012 12:39 PM  

Suppose that everyone was either a schoolteacher, a firefighter, or a nurse. How much wealth would be collectively produced by them?

Suppose everyone was a steel mill worker. How much wealth would they produce before they starved?

Lots of not-directly-productive workers are in fact completely unproductive. But some of them aren't, and civilization wouldn't work without them.

Anonymous re allow anonymous comments October 30, 2012 12:40 PM  

For all their IQ, they are very simple-minded people.

Anonymous Josh October 30, 2012 12:45 PM  

Same for nurses/doctors who prevent excessive damage/death from disease and injury. Life is not a luxury good.

That is the logic for universal healthcare you twit.

Blogger James Dixon October 30, 2012 12:47 PM  

> How many acres are you going to plow when nobody has educated the engineers to make your equipment?

There are these things called horses and oxen. You may have heard of them.

> When you get down to it, there are VERY few actual producers in the economy.

Agreed. And my job isn't even one of them. I'm IT. I try to keep things working and fix them when they break. That's maintenance, not production. Like medical care, it's valuable, but it's not production.

> So government CAN create jobs of value, just not jobs of optimal value.

Value does not equal production and vice versa. The two are not identical things.

Anonymous titanofindustry October 30, 2012 12:48 PM  

This is moronic. Songs and video games are not capital goods either, maybe you should've been forced to work in a coal mine.

Blogger Joshua_D October 30, 2012 12:49 PM  

691 October 30, 2012 12:38 PM

In principle, firefighters may not produce anything per se, but they clearly add to net total stuff by limiting the extent of damage by fire. Same for nurses/doctors who prevent excessive damage/death from disease and injury. Life is not a luxury good.


Firefighters don't produce anything. No, they don't "add" to net total stuff. This is like a woman saying she "saved" $100 by buying a $600 ring that was on sale for $500. You need a different word/category for what you are talking about.

Firefighters provide a service. People may value that service and pay for it, but firefighting doesn't produce a good. You can easily argue that such a service can preserve wealth, but it clearly doesn't add.

Blogger Joshua_D October 30, 2012 12:51 PM  

Matt October 30, 2012 12:39 PM

Suppose that everyone was either a schoolteacher, a firefighter, or a nurse. How much wealth would be collectively produced by them?

Suppose everyone was a steel mill worker. How much wealth would they produce before they starved?

Lots of not-directly-productive workers are in fact completely unproductive. But some of them aren't, and civilization wouldn't work without them.


The steel workers would actually produce steel before they all starved to death. Teachers don't produce anything.

Anonymous titanofindustry October 30, 2012 12:57 PM  

Agreed. And my job isn't even one of them. I'm IT. I try to keep things working and fix them when they break. That's maintenance, not production. Like medical care, it's valuable, but it's not production.

Then your job is not really a job! Or something... Because apparently government doesnt create jobs because they aren't productive.

Anonymous 691 October 30, 2012 12:59 PM  

Firefighters don't produce anything. No, they don't "add" to net total stuff. This is like a woman saying she "saved" $100 by buying a $600 ring that was on sale for $500. You need a different word/category for what you are talking about.

Lightning strikes your house and it catches fire. With no firefighters, it burns to the ground, forcing you to rebuild the entire house. With firefighters, say, it gets put out before causing any structural damage, meaning you just need to replace your some of you belongings and redo the interior. That's a net positive.

Anything of value that someone produces will decay, be destroyed or deteriorate. Extending the lifetime and usability or preventing damage of such a product is a net positive.

Blogger Joshua_D October 30, 2012 1:01 PM  

No 691, that's not a net positive. Are you a firefighter?

Blogger Joshua_D October 30, 2012 1:04 PM  

When the lightning strikes your house, and your house catches fire, you are already in net negative territory. Having firefighters come put out the fire could mitigate your loss, and as such, likely has a lot of value to the people whose home is burning do, but that service does not "add" anything to total goods.

Blogger IM2L844 October 30, 2012 1:04 PM  

This inexorably methodical creep toward egalitarianism is nothing short of an artful rebranding of communism to make it more palatable to the self-centered western consumer.

Anonymous Daniel October 30, 2012 1:09 PM  

The rare mythical "job of value" created by government will be a malinvested in any case. The opportunity cost of government producing a job that actually provides a product is that it will directly compete, with "unfair" advantage against a less expensive private position of the same duty.

Best possible scenario whereby government produces "something:"

Let's say there is such a thing as government shoemaker. He crafts durable, low-costs shoes for laborers and begins to sell them in your village. The private shoemaker in town is sparked by competition to make better shoes at lower costs.

The government, realizing that competition is good for business and even better for the consumer, takes full advantage of its leverage: it will now pay its shoemaker through taxpayer funds to improve his shoes and further lower his costs.

The shoemaker has only his fair income for the products he sells to reinvest, but he does it, expanding his shop and his ability to produce high quality shoes at a faster rate.

The consumer has options and is happy to buy a new pair of month instead of every year. Business is booming...on the production side...and sales (at lowering margins) are increasing in the first three months.

The town of 100 people are now purchasing a new pair of shoes every month (a projected rate of 1200 total/year) instead of 100/year. Production multiplies x12.

Great, right? Except that prices are artificially low.

That means that natural demand is masked under the veneer of subsidized competition.

So, after the first three months, people have plenty of shoes, more shoes in 3 months than they used to buy in 3 years. But those shoes are starting to clutter up the entry way of their huts. They aren't wearing out as fast, and, despite having the benefit of Old Lady Imelda living down the street, the resident shoe collector, even she can't make up, with her extra purchases, the declining demand for shoes.

Government shoemaker isn't worried. He's got a quota, he's got government expectations, and he's got artificially inflated capital coming through the taxpaying (and dwindling shoebuying) public.

So he makes more. He lowers prices, because, hey, the poor need shoes, and he's not in this business to make a killing. He's salaried after all. His profits don't impact his production plans and investment one way or the other. He's in the shoe business to provide value to the community now. Profits aren't the bottom line.

Meanwhile, private shoemaker can't compete on price, so he tries to differentiate. "Buy local!" his sign says, hanging right next to the local government shoemaker. He starts looking desperate. Customers become neighbors who have the guilty duty of "helping out the little guy." He produces fewer shoes, because they aren't selling, but even that reduction is a glut of a market based off of false, subsidized data.

The projections of 1200 shoes sold annually, which had in month #3 been a reasonable use of the existing (bad) data, now reveals itself to be wildly optimistic. Instead, real purchases for that year are going to be something like 3 pairs per person total, or 300 shoes.

But the government shoemaker sticks to the production schedule, creating a surplus, which, at year end, is just cluttering up the facility.

So government shoemaker, in the Christmas spirit, does a giveaway with government's blessing.

Suddenly, the people of your village are set for years in the shoe department. The private guy has a product no one needs, and shuts up the store, especially since government shoemaker is funded by Congress through 2015. There's no way he has the reserves to outlast the eventual awareness of the government that the shoemaker is no longer in the public interest.

The store closes. The shoes rot. In five years, there's an empty storefront, a government shoemaker no one visits anymore, and tons of shoes rotting in the streets.

Anonymous VD October 30, 2012 1:11 PM  

So government CAN create jobs of value, just not jobs of optimal value.

Not net, which is the macroeconomic context that Samuelson, Baker, and Krugman are discussing. I mean, sure, a government can establish Federal Motors and hire workers to make cars. No one disputes that. But that's not what is being discussed here.

Anonymous Dan in Texas October 30, 2012 1:12 PM  

Again, even in the above scenario of the firefighter saving some of the value of the house, he still has PRODUCED nothing. Now his saving part of the value of your house has a value to you but it does not mean he has produced something. I would even argue against the net VALUE argument. If the firefighters and station house have a budget of say $20 million a year and they only save $5 million a year in property then it's still a net loss.

Anonymous Anonymous October 30, 2012 1:13 PM  

The problem isn't that these classes of workers create no value, it's that there is no market price mechanism to ensure that the value they're creating is greater than the amount we are extracting from everyone else to pay them. The fact that they don't produce tangible market saleable goods just makes it even harder to measure the value of what they're producing. The obvious comparison is between public and private schools. At the end of the day, a private school teacher can only earn as much as a parent is willing to pay to have the teacher teach their children. A public school teacher can make $100k or more even if she is terrible and nobody wants her to teach their kids. Therefore, private school teachers must create value or they will go out of business, while public school teachers are very likely to be parasites sucking value out of the system.

Anonymous VD October 30, 2012 1:13 PM  

Lightning strikes your house and it catches fire. With no firefighters, it burns to the ground, forcing you to rebuild the entire house. With firefighters, say, it gets put out before causing any structural damage, meaning you just need to replace your some of you belongings and redo the interior. That's a net positive.

Irrelevant. Nothing has been produced. Furthermore, if the cost of employing the firefighters year-round is greater than the cost of building one new house, the firefighters are a net negative even if they save one house. Non-economists always forget cost, particularly opportunity cost.

Anonymous titanofindustry October 30, 2012 1:13 PM  

Maybe we should get rid of schoolteachers and firefighters and replace them with meth cookers and pornographers, because at least they produce something! Surely then we'll have a healthy society because government just gets in the way and distorts the market!

Anonymous JCclimber October 30, 2012 1:14 PM  

I work in the SF Bay Area. One of my tasks is "teaching" people in my company how to solve problems. A quick check at one of the breaks of where people stand politically gives me a quick insight into how smoothly day 2 is going to go.

I frequently see highly "credentialed" professionals be unable to grasp the concept that Quality Control and inadequate validation testing does not cause errors, at most it fails to detect them early enough.

The other one is that the Quality job functions don't add value to our product, they are just a necessary input to our process to meet regulatory law. Before I learned how to be subtle on this point, I had one person write an email, during the class, to the executive VP that I was teaching that quality personnel had no value to the company. I leave it to you to guess that person's gender.

My ability to distinguish these finer points must be why I'm paid the big bucks.

This is at a company where we are hiring the "best and brightest".

Anonymous 691 October 30, 2012 1:15 PM  

When the lightning strikes your house, and your house catches fire, you are already in net negative territory. Having firefighters come put out the fire could mitigate your loss, and as such, likely has a lot of value to the people whose home is burning do, but that service does not "add" anything to total goods.

The correct baseline to judge whether you gained something from firefighters is your level of stuff after the fire that would have occurred, not your level of stuff before the fire. This is because it is an inherent property of stuff that sometimes it disappears; it doesn't endure for ever.

Anonymous 691 October 30, 2012 1:18 PM  

Irrelevant. Nothing has been produced. Furthermore, if the cost of employing the firefighters year-round is greater than the cost of building one new house, the firefighters are a net negative even if they save one house. Non-economists always forget cost, particularly opportunity cost.

It's certainly not irrelevant. And what is the opportunity cost of the builders who could have been building another house instead of rebuilding yours?

Of course, the firefighters could cost more than they save in property damage. But a business can produce something and still spend more than that product is worth. That argument doesn't invalidate all businesses, just the unproductive ones. If you want to argue that currently, certain fire depts are not worth the costs, show me the spreadsheets and I'll agree. But that doesn't invalidate firefighting as a productive enterprise when run profitably.

Anonymous JCclimber October 30, 2012 1:20 PM  

Daniel, that was an excellent example.

Notice that the government worker has the best of intentions, and isn't actually a bad guy. Just woefully uneducated in the real world.

Blogger Joshua_D October 30, 2012 1:21 PM  

691, are you a firefighter? Please answer the question.

Anonymous 691 October 30, 2012 1:23 PM  

*"just the unprofitable ones

Blogger Joshua_D October 30, 2012 1:24 PM  

titanofindustry October 30, 2012 1:13 PM

Maybe we should get rid of schoolteachers and firefighters and replace them with meth cookers and pornographers, because at least they produce something! Surely then we'll have a healthy society because government just gets in the way and distorts the market!


I suppose you're not teaching at school today due to the snowicane?

Anonymous 691 October 30, 2012 1:24 PM  

691, are you a firefighter? Please answer the question.

No

Anonymous Gx1080 October 30, 2012 1:24 PM  

I see a lot of emotion on both sides of the argument, both from those that believe that the service sector is more virtuous and those that believe the opposite.

Is the good old "public vs. private sector" argument again. First, both are neccesary and second, the transition between congressman and Goldman Sachs advisor can quickly make the disctinction irrelevant.

Oh, and is hilarious to hear the left-liberal elite pretending that they give a crap about teachers when teacher's unions boycotted on the DNC. But then, their bloating is mostly disgust at anybody else besides the Ivy League aristocracy living well.

Anonymous JCclimber October 30, 2012 1:25 PM  

So 691, you're saying that if a thief were coming into your home while you were on a 2 week vacation, and wanted to steal $30,000 worth of your goods...

And after stealing and fencing $10,000 before being caught by the police, the police "produced" $20,000 worth of value to you? Because after all, if they hadn't caught him/her, the thief would have taken all $30,000?

What about when you add in that the police, judges, legal clerks, dispatcher, and 20 retired cops are costing you $15,000 per year in taxes?

How many times per 10 years will the police need to catch a thief before you break even?

Anonymous VD October 30, 2012 1:28 PM  

It's certainly not irrelevant. And what is the opportunity cost of the builders who could have been building another house instead of rebuilding yours?

Of course it is. You are failing to note that in no case are the firefighters productive. The opportunity cost of the builders is irrelevant so long as they are not maxed out, in fact, it gives them the opportunity to be more productive since demand is increased to the tune of one house.

If you want to argue that currently, certain fire depts are not worth the costs, show me the spreadsheets and I'll agree. But that doesn't invalidate firefighting as a productive enterprise when run profitably.

It is an intrinsically unproductive enterprise, whether run "profitably" or not.

Anonymous Josh October 30, 2012 1:34 PM  

First, both are neccesary

Wrong.

Blogger Joshua_D October 30, 2012 1:36 PM  

Josh October 30, 2012 1:34 PM

First, both are neccesary

Wrong.


Yep. I tend to think both are inevitable, but I don't believe the public sector is necessary, nor do I believe that the service sector is necessary.

Anonymous Josh October 30, 2012 1:36 PM  

So...if Vito comes in and breaks one of your kneecaps because you lost a bet at the track...691 is arguing that Vito is providing a productive enterprise...because at least Vito didn't break both kneecaps?

Blogger Joshua_D October 30, 2012 1:38 PM  

Josh October 30, 2012 1:36 PM

So...if Vito comes in and breaks one of your kneecaps because you lost a bet at the track...691 is arguing that Vito is providing a productive enterprise...because at least Vito didn't break both kneecaps?


One kneecap is more valuable then no kneecaps, Josh! Unless of course you're suggesting we all become porn stars!

Anonymous Daniel October 30, 2012 1:39 PM  

Oh, come on, people. The fire department isn't a factory for making fires. You don't go to the fire department to pick up some professional grade fire. They don't make axes, hoses, alarms, or fire engines. Heck, they don't even make books about fighting fires, or other entertainment products.

In one word, what is the product of a private, volunteer, or public fire department?

I knew of a local fireman who invented some sort of firefighter's widget, and who started his own widget company/factory in his woodshed, not the fire department. That's how far firefighting is from production.

Anonymous Josh October 30, 2012 1:39 PM  

Yep. I tend to think both are inevitable, but I don't believe the public sector is necessary, nor do I believe that the service sector is necessary.

The service sector isn't "necessary", but it can indirectly increase future production if the service makes present production more efficient or cheaper.

Anonymous CatDog October 30, 2012 1:39 PM  

Firefighting does serve an economic function though. In that they can save millions of dollars in damage, lost production and services to businesses if they reduce the damage that would have been inflicted to businesses otherwise.

Anonymous Boetain October 30, 2012 1:40 PM  

I deal with a lot of "producers" on a day-to-day basis. I hear them describe the growing intrusion of government taxation and regulation from the fed, state, and local bureaucrats. And I wonder if someday things will just grind to a halt. The producers are like runners who should be on level asphalt. Instead, they are running uphill through quicksand.

Anonymous Josh October 30, 2012 1:41 PM  

In one word, what is the product of a private, volunteer, or public fire department?

Those charity calendars they sell to bored housewives and cougars?

Anonymous Anonymous October 30, 2012 1:41 PM  

Maybe we should get rid of schoolteachers and firefighters and replace them with meth cookers and pornographers, because at least they produce something! Surely then we'll have a healthy society because government just gets in the way and distorts the market!"

Getting rid of schoolteachers? You're onto something here. And firefighters? I say let the ghettos burn. Hopefully, you'll cook with them you DWL moron. Now go help them black folk in DC, they be hungry and all...

Anonymous Josh October 30, 2012 1:42 PM  

Firefighting does serve an economic function though. In that they can save millions of dollars in damage, lost production and services to businesses if they reduce the damage that would have been inflicted to businesses otherwise.

No one is denying that. We're saying that's not producing a tangible good.

Blogger Nikis-Knight October 30, 2012 1:43 PM  

I'll certainly agree that firefighting & health care, etc. doesn't produce wealth, but it does protect wealth, so at a certain level it would be a valid economic trade off to reduce the wealth created to have a measure of protection for the whole. Of course this doesn't imply that the fireman is intrinsically more economically valuable than his neighbor.
Education may theoretically have a contributing factor towards enhacing production of wealth, such that teaching, say, mining engineers calculus or physics will allow them to develop methods making themselves 15% more productive.
The trouble with that is that the people teaching creative puppetry, or even teaching calculus to children who will not likely put it to use if they understand it in the first place, get lumped in with the other teaching that could potentially create wealth. And... well, there's lots of problems with education as ya'll discuss here frequently.
And then there's all the lovely government created jobs in predatory law-fare.

Anonymous titanofindustry October 30, 2012 1:46 PM  

You guys seem to have a hard time understanding that a smaller negative than otherwise is a positive. Whether you count that towards production or just "value" is largely irrelevant, it's desireable.

Anonymous Frogger Dogger October 30, 2012 1:49 PM  

In this thread, people confuse 'value' in the economic sense with 'value' in the human worth sense. And hence become irrational at the thought that firefighters can be considered worthless.

Only politicians are worthless. Everyone else has moral value.

Anonymous Josh October 30, 2012 1:52 PM  

You guys seem to have a hard time understanding that a smaller negative than otherwise is a positive. Whether you count that towards production or just "value" is largely irrelevant, it's desireable.

Did you not agree with my Vito story?

Blogger vandelay October 30, 2012 1:56 PM  

Not net, which is the macroeconomic context that Samuelson, Baker, and Krugman are discussing. I mean, sure, a government can establish Federal Motors and hire workers to make cars. No one disputes that. But that's not what is being discussed here.

Fair enough, just trying to understand where you're coming from with that statement.

Anonymous VD October 30, 2012 1:56 PM  

You guys seem to have a hard time understanding that a smaller negative than otherwise is a positive. Whether you count that towards production or just "value" is largely irrelevant, it's desireable.

No, we don't. You are failing to understand that a smaller negative than otherwise is only a positive if the costs of reducing the negative are smaller than the amount reduced. So, it is not necessarily desirable, it is only potentially desirable.

Anonymous Anonymous October 30, 2012 2:00 PM  

---Only politicians are worthless. Everyone else has moral value.---

Visit Detroit...

Anonymous titanofindustry October 30, 2012 2:02 PM  

No, we don't. You are failing to understand that a smaller negative than otherwise is only a positive if the costs of reducing the negative are smaller than the amount reduced. So, it is not necessarily desirable, it is only potentially desirable.

Clearly, that's implied. But you're not seriously arguing that in this case because to settle the firefighter argument as it applies in the real world would involve mounds of statistics and evidence that you're not going to try to produce because it would be too much work, and inevitably we'd get lost in the weeds anyway. So you're just being pedantic.

Blogger Nikis-Knight October 30, 2012 2:12 PM  

"In one word, what is the product of a private, volunteer, or public fire department?"

Hmm, thinking abou this more, one could say that fire-fighters take the raw-material of burning houses and produce the final product of non-burning houses, although they often end up with non-burning rubble instead. Assuming success (and no producer is perfectly sucessful) their product has a great value to those who provided them with the burning houses (who may or may not have been the ones who added the burning part).

Unless the fire-fighter is also an arsonist, I'd say that's a net boon.

I think the main reason this wouldn't work as a private, for profit enterprise (as in an auto mechanic who specializes in repairs) is that a burning home is an urgent situation that must be addressed as soon as possible leaving no time to arrange negotiations with the owner, and there is a lot of direct benefits to the neighbors and local area.

Anonymous Jake October 30, 2012 2:13 PM  

Disagree with Vox here.

Firefighters, teachers, etc are not non-productive because of what they do. "Productive" has nothing to do with the creation of some sort of tangible good. Are we to say that the musician is non-productive because all he does is play music for people's enjoyment, but a laborer building record players IS productive because he builds something that is only good for playing music for people's enjoyment? If people will pay for it out of their own money I'd call it productive either way.

Teachers are non-productive, or at least often assumed to be so, because they receive their earnings from tax funds rather than voluntary transactions. A private tutor may do the same thing as a P.S. teacher, but the tutor is undeniably productive (in the opinion of the person paying for their services) the other may or may not be, we really can't say since we have no idea whether the parents of the teacher's class would freely offer up enough to cover her expenses and salary or not. Given what we know about public schools, and how even the good teachers who WANT to do their best generally find doing so very difficult, and given that private school teachers make significantly less, it's a safe assumption that most public school teachers are NOT contributing to society in anyway commensurate to what they take from it.

It's the same with firefighters, a firefighter most certainly COULD be productive. There's no doubt he provides a valuable service and I suspect that if the government didn't do it home insurers or home owners associations or some other body would contract with a fire-fighting company to come put out the occasional fire. The problem is right now that doesn't happen often and instead firefighters get their pay from compulsory taxation. We do not KNOW if your typical firefighter is productive or not because there's no test of people being free to pay for his services or not.

An analogy: If everyone in a college class automatically got an A we would not be correct in saying "all of those students flunked the class but got an A anyway". In reality some learned the material very well, some acceptably well, and some flunked. We do not know which ones did their jobs and which did not because their final grade doesn't in anyway reflect their grasp of the material. Similarly we do not know which teachers, firefighters, etc. actually contribute as much as they take because everyone gets paid and the consumers cannot choose who they hire and/or how much they'll offer them.

Of course, if everyone in that class KNEW they'd get an A no matter what they did you can bet you'd have very few students still working at a passing level, much less a level deserving an A... And so it is for teachers and probably firefighters too (though I suspect to a much less pronounced degree). Everybody gets paid, nobody gets fired, you can bet most of them are slacking off. But it has nothing to do with the type of service they provide, and everything to do with where they draw their paycheck from.

Anonymous fleaofindustry October 30, 2012 2:16 PM  

I think the main reason this wouldn't work as a private, for profit enterprise (as in an auto mechanic who specializes in repairs) is that a burning home is an urgent situation that must be addressed as soon as possible leaving no time to arrange negotiations with the owner, and there is a lot of direct benefits to the neighbors and local area.

Could not one negotiate before hand?
Pay me $1000 a year and if there is a fire we'll be there shortly.
Hmmmm...
Ok, $800 a year.
Done.


Anonymous 691 October 30, 2012 2:18 PM  

, in fact, it gives them the opportunity to be more productive since demand is increased to the tune of one house.

Not taking the bait, Vox.

But perhaps the disagreement is elsewhere. It's clear that firefighters, like auto mechanics, increase the total amount of products in an economy by stymieing the natural deterioration and destruction of what has already been produced. That is, there is more stuff relative to the baseline set once you consider that any tangible good is inherently temporal as its utility declines over time. Nature takes its toll on any human-produced good, cars break, houses burn down. If the losses are due to natural disasters or normal wear and tear, then mitigating losses should really be viewed as a positive gain. And just like a business can produce a product of tangible value at a loss, so can a fire department increase the total amount of tangible goods in a society, relative to the correct baseline, but at a cost that doesn't justify the gains.

Let's leave aside a complete summation of all costs and gains. You seem to be arguing that saving a product that will otherwise deteriorate is different than producing an identical new product. Is this true and why is it important economically?

Blogger Nikis-Knight October 30, 2012 2:21 PM  

"Could not one negotiate before hand?"
There was actually an instance of this in the last year or two, where one person hadn't payed the fire-fighter fee, and his neighbors had, and the fire-department let his house burn while they stood by to protect the neighbors. (The expected recriminations followed)
So I guess it can work, but the idiots/risk-takers make convenient victims.

Anonymous titanofindustry October 30, 2012 2:24 PM  

No, we don't. You are failing to understand that a smaller negative than otherwise is only a positive if the costs of reducing the negative are smaller than the amount reduced. So, it is not necessarily desirable, it is only potentially desirable.

You major failing is in daring to make declarative statements about things that are decidedly not settled. Not settled, not because "most people are idiots" or some other rationalization for your own vanity but because the issues themselves are murky and contentious and often involve factors that do not present themselves concretely. Firefighters often save things that don't have a dollar value on them, and cannot be valued that way. Sentimental objects, lives, those sorts of things. You think yourself smart by declaring that of course, the benefits must outweigh the costs if something is to be worthwhile, but that only goes to show that, as you've said before, a high iq does not necessarily imply wisdom.

Anonymous Ubiquitron October 30, 2012 2:25 PM  

There was actually an instance of this in the last year or two, where one person hadn't payed the fire-fighter fee, and his neighbors had, and the fire-department let his house burn while they stood by to protect the neighbors. (The expected recriminations followed)
So I guess it can work, but the idiots/risk-takers make convenient victims.


So was the idiot the one who knowingly paid the fee or the one who knowingly didn't?
I'm confused.

Anonymous VD October 30, 2012 2:26 PM  

But you're not seriously arguing that in this case because to settle the firefighter argument as it applies in the real world would involve mounds of statistics and evidence that you're not going to try to produce because it would be too much work, and inevitably we'd get lost in the weeds anyway. So you're just being pedantic.

Of course I am seriously arguing it. And I'm almost surely correct, because firefighters actually spend very little time fighting fires. Moreover there is nothing pedantic about pointing out the inherently non-productive aspect of a service occupation that produces nothing.


Are we to say that the musician is non-productive because all he does is play music for people's enjoyment, but a laborer building record players IS productive because he builds something that is only good for playing music for people's enjoyment?

Absolutely. That's why economists differentiate between goods and services, and even between capital goods and consumer goods.

You seem to be arguing that saving a product that will otherwise deteriorate is different than producing an identical new product. Is this true and why is it important economically?

Yes, this is true. Because economic growth ultimately depends upon technological advancement. None is possible through a maintenance economy.

Anonymous Jake October 30, 2012 2:29 PM  

Absolutely. That's why economists differentiate between goods and services, and even between capital goods and consumer goods.

And which economists say the provider of a service isn't productive?

Anonymous titanofindustry October 30, 2012 2:30 PM  

Incidentally, you're implying that if your wife and child were killed in a raging house fire you would have no problem, as long as a bean counter was able to show you the spreadsheet that said it was cost prohibitive to have firefighters.

Anonymous VD October 30, 2012 2:31 PM  

You major failing is in daring to make declarative statements about things that are decidedly not settled. Not settled, not because "most people are idiots" or some other rationalization for your own vanity but because the issues themselves are murky and contentious and often involve factors that do not present themselves concretely. Firefighters often save things that don't have a dollar value on them, and cannot be valued that way. Sentimental objects, lives, those sorts of things. You think yourself smart by declaring that of course, the benefits must outweigh the costs if something is to be worthwhile, but that only goes to show that, as you've said before, a high iq does not necessarily imply wisdom.

You're wrong. You're also an idiot. Not because you're wrong, but because you refuse to accept that you're wrong even when it has been demonstrated to you. This issue is not only settled, it has been settled for literal centuries.

Worse, you appear to be flirting with dishonesty. This is a discussion of economics, not sentiment. The fact that firefighters might save something priceless is totally irrelevant to fact that services aren't goods. Frankly, I find it remarkable that four years into a depression, people are still buying the stupid late '80's "produce wealth through services" concept that any reasonable person knew was nonsense at the time.

It doesn't matter if it is putting out fires or giving back massages, neither can ever produce societal wealth.

Anonymous Jake October 30, 2012 2:32 PM  

You seem to be arguing that saving a product that will otherwise deteriorate is different than producing an identical new product. Is this true and why is it important economically?

Yes, this is true. Because economic growth ultimately depends upon technological advancement. None is possible through a maintenance economy.


Huh? So we'd be better off sending a car to the scrap-yard every time it broke broke down rather than... I don't know... changing the oil? How is that not the same thing?

Anonymous VD October 30, 2012 2:32 PM  

Incidentally, you're implying that if your wife and child were killed in a raging house fire you would have no problem, as long as a bean counter was able to show you the spreadsheet that said it was cost prohibitive to have firefighters.

Now you're just being a complete fucking moron. I never implied anything of the kind.

Kick him around as you like, gang, he's definitely too short for the ride.

Anonymous VD October 30, 2012 2:34 PM  

Huh? So we'd be better off sending a car to the scrap-yard every time it broke broke down rather than... I don't know... changing the oil? How is that not the same thing?

Read it again and think about it a little more.

Anonymous titanofindustry October 30, 2012 2:37 PM  

Now you're just being a complete fucking moron. I never implied anything of the kind.

Well, maybe you're not even that smart. Saying,

You are failing to understand that a smaller negative than otherwise is only a positive if the costs of reducing the negative are smaller than the amount reduced.

implies that the costs can be determined. What would you determine to be the cost of losing your family?

Kick him around as you like, gang, he's definitely too short for the ride.

LOL! Get him gang! It's like a Christian West Side Story where the gang members go home to pray and drink some milk before bed.

Anonymous asdf October 30, 2012 2:37 PM  

Man this is silly. This is what happens when its all about hate.

We've got people here telling me we'd all be better off if we went back to oxen and plows versus tractors because the people teaching others how to build tractors aren't "producers". Ridiculous. I guess anyone not currently slamming a hammer into something else is a parasite that needs to be rooted out.

Well guess what, all of modern productivity is the result of investment in human capital. And human capital is the most productive thing in the entire world. That's why we only need 2% of the population doing flat out physical production. Because the other 98% (parasites all, right) produced the ideas that allowed them to be wildly more productive then if they were just on their own. And thank God we aren't all 99% subsistence farmers like most of history (though then I guess we'd all be producers).

What we've got there is a case of aspie derangement syndrome.

Anonymous robh October 30, 2012 2:41 PM  

I think some of you take the point about teachers, nurses and firefighters a bridge too far. For example:

"The other one is that the Quality job functions don't add value to our product, they are just a necessary input to our process to meet regulatory law."

That may be true in some cases, but it's not a general truth, or even true most of the time. Even in the absence of regulation, producing a product of consistent quality is vital to the act of production. I'm familiar with a local business that produces specialty chemicals for processing semi-conductors and they either make perfect product nearly all of the time or they go out of business. So the much derided QC engineers are an integral part of doing business rather than merely maintenance.

I agree with the original point as it pertains to teachers, nurses, firemen, but the characterization of all service occupations as part of the "maintenance economy" is a mistake.

Anonymous kh123 October 30, 2012 2:51 PM  

"With no firefighters, it burns to the ground, forcing you to rebuild the entire house."

Quite a positive boost to economic activity by Krugman's yardstick. Break them windows.

Anonymous Gen. Kong October 30, 2012 2:54 PM  

Daniel:
This is why all the effete intellectuals bend toward Marxism. They envy the producer they can't possibly hope to understand. It's like the Fantasy Football guy who is pissed off he was passed over for Ted Thompson, when everyone knows very well he ought to be the GM of the Packers.

If it were only the effete egghead professors who pushed Marxism, it would not be the ruling force it is today. The professors have been enamored of it for a long time - well over a century. They love the theories and endlessly invent reasons to explain how the disasters of the past century were the result of imperfect application of the holy dogma. The practicioners, however, are the ones who understand that it is all about the acquisition of unlimited power and control over everything and everyone on the planet. Hence the Warburgs, Rockefellers, J.P. Morgan, Soros, Blankfein, and the other vampire-squids (who are "producers" in the idiotic mindset of the typical Limbaugh follower) have been pushing one or another variant of this utopian ideology since well before 1913. At the end of the day, Keynes, Krugman and other assorted Marxist eggheads are pathetic little monkeys dancing to the perverted organ-music being ground out by their vampire-squid overlords. They will never be "Masters of the Universe" and they know it. So they direct their hatred and resentment towards those who somehow actually manage to produce something even in the rigged "free-market" system while never mentioning the vampire-squids who continue to suck the life out of everything.

Anonymous MendoScot October 30, 2012 2:57 PM  

Where did the house come from, for the firefighter to save?

Where did the medications come from for the nurse to apply?

Where did the books come from for the teacher to teach?

The farmer, the miner and the engineer pay for these services out of their surplus production, thus freeing up their time from taking care of their health, house and kids to become more productive.

Even an economic dilettante (and non-productive member of society*) such as myself understands this concept.

*Barring my kitchen garden and progeny.

Anonymous Daniel October 30, 2012 2:59 PM  

asdf - No, dunderhead. What we are lacking here is a sufficient amount of hate. More intense hatred of idiocy, horrible education, economic illiteracy and the inability to distinguish like a normal thinking person between products in an economy and family members would go a long, long way toward solving the problem that our intellectual inferiors appear to be struggling with here.

If you don't know the difference between a service and product, please just sit quiet on the short bus until you get to the big box with a door on it. Who cares if it is your house or a garbage can?

You won't know the difference.

Anonymous MendoScot October 30, 2012 2:59 PM  

tl;dr

Society 1: teachers, nurses and firefighters

Society 2: farmers, miners and engineers

Place your bets.

Anonymous VD October 30, 2012 3:01 PM  

Saying, "You are failing to understand that a smaller negative than otherwise is only a positive if the costs of reducing the negative are smaller than the amount reduced" implies that the costs can be determined.

Ah, so you are the dishonest little worm I suspected. Implying the costs can be determined is not at all what you originally said, which was "you would have no problem, as long as a bean counter was able to show you the spreadsheet that said it was cost prohibitive to have firefighters."

What I have or don't have a problem with has nothing to do with macroeconomics.

Anonymous Procol Harumph October 30, 2012 3:10 PM  

This is getting way too much into semantics, which is another way of saying it's being silly.

Of course teachers and firefighters are technically not "productive", nor net "producers." People are absolutely right to assert that. But it's not the same as saying they aren't "useful" in some way, or "valuable." It just depends on what the net cost is relative to the value (viz., how many do we REALLY need?) and because this is manipulated on a cynical level by politicians, who claim we always need MORE OF SAME (the general public has no way of knowing whether this is true, but feels the sentiment) when what they're really doing is using "nice" jobs like more teachers and firefighters as cover for more generalize "patronage" jobs in the government bureaucracy, by using a narrow category to include a broad one.

In other words, it's just smoke.

If we were to conduct an honest, genuine audit of the needs of a given community, it wouldn't be hard to find out how many teachers and firefighters are "really" needed, and it's probably usually less than what they have at present. That doesn't mean that a certain number aren't useful or valuable; but in the strict semantic economic sense that's being used here, it does always mean that they aren't "productive". It's just that "productive" isn't the main criterion we use when judging whether or not to have civil servants.

Firefighters are a form of insurance. Everyone sleeps a little better, knowing that their house probably isn't going to burn down. That's not, strictly speaking, a "productive" asset, but it's one that the community would be wise to consider having. How many and how much and at what cost, is a separate question, and a good one.

For a long time I lived in a neighborhood that had a lot of cops living in it. Guess what? There was almost no crime! Because all the crooks knew where all the cops lived, and they stayed away from there! And guess what! It was helpful and useful to live in a place where there was no crime, and where like a third of your neighbors were armed and trained in crime suppression! Was it strictly speaking "productive"? No, not literally. But I sure got an awful lot of productive work done, more than I did when I lived in a high-crime area.

Go figure.

Anonymous JohnS October 30, 2012 3:11 PM  

@titan of industry-
Songs and videogames aren't "sold" at gunpoint, people voluntarily choose to buy them. Can you see the difference, or do you need a picture drawn for you?

Anonymous Josh October 30, 2012 3:23 PM  

But society two won't have any chicks!

Anonymous WaterBoy October 30, 2012 3:26 PM  

MendoScot: "Where did the books come from for the teacher to teach?"

You've actually identified the one area where teachers can be productive, in the sense of producing something tangible. But it's still not teachers qua teachers; it's teachers qua authors, producing textbooks and papers used by other teachers.

Anonymous DrTorch October 30, 2012 3:29 PM  

Hence the Warburgs, Rockefellers, J.P. Morgan, Soros, Blankfein, and the other vampire-squids (who are "producers" in the idiotic mindset of the typical Limbaugh follower

I don't think the first Rockefeller belongs listed w/ the rest.

Wouldn't mind seeing a more rigorous definition to separate these from the real producers.

Anonymous Paul Sacramento October 30, 2012 3:35 PM  

To be productive one must produce SOMETHING.
Government employees may fill a need, but they don't produce anything.
Police keep the peace and enforce laws, but they don't produce anything. Firefighters put our fire, save lives and effect the economy positively when they reduce the losses of property and such, they fill a void and a need in society, but they produce nothing.
Same for nurses, accountants, lawyers and so forth.
If there was a holocaust of some sort and we had to start society all over again, we would need builders and doctors and hunters and farmers and so forth, we need a combination of producers and need-fulfillers.

Anonymous WaterBoy October 30, 2012 3:37 PM  

Paul Sacramento: "Government employees may fill a need, but they don't produce anything."

Powerpoint presentations don't count?

Blogger Joshua_D October 30, 2012 3:38 PM  

Procol Harumph October 30, 2012 3:10 PM

This is getting way too much into semantics, which is another way of saying it's being silly.

Of course teachers and firefighters are technically not "productive", nor net "producers." People are absolutely right to assert that. But it's not the same as saying they aren't "useful" in some way, or "valuable."


Exactly who is being semantic. You just used three different words, which describe three different things.

"Productive" is not the same thing as "useful," and neither "productive" nor "useful" are the same as valuable. If the teachers who are hyperventilating could learn some vocabulary, we'd all be better off.

Blogger The Anti-Gnostic October 30, 2012 3:39 PM  

It is an intrinsically unproductive enterprise, whether run "profitably" or not.

Correct. They are cost, not revenue. This is not to say they are unnecessary, but that's always the side of the ledger they're going to be on. I make my living off the cost side--so do lots of people. But increasing firefighters, etc., is not going to increase societal wealth by one penny, and if they end up under-utilized, it's a net loss.

Blogger Joshua_D October 30, 2012 3:39 PM  

MendoScot October 30, 2012 2:59 PM

tl;dr

Society 1: teachers, nurses and firefighters

Society 2: farmers, miners and engineers

Place your bets.


Can I go long on S2, and short S1?

Anonymous Daniel October 30, 2012 3:41 PM  

Procol Harumph
For a long time I lived in a neighborhood that had a lot of cops living in it. Guess what? There was almost no crime! Because all the crooks knew where all the cops lived, and they stayed away from there! And guess what! It was helpful and useful to live in a place where there was no crime, and where like a third of your neighbors were armed and trained in crime suppression!

Ah, so your neighborhood, I'm sure, paid a significantly higher percentage of the taxes necessary to support the cops for them to sleep there, right?

Otherwise, you were the beneficiary of an extra subsidy, funded by your fellow citizens who didn't "benefit" from the sleeping policemen, but nevertheless funded your safety and security.

In any case, you are way off base here - firemen, teachers, and yes, even quality control engineers, when they aren't actively producing, are supplemental in their best form to agents of production.

An engineer can build a decent robot without a QC engineer, even if the QC engineer helps ensure its decency. A QC engineer, on the other hand, can't control the quality of a robot that has not been built.

A fireman can't alter the production rate of houses, even if he can control the protection of them. A fireman without a homebuilder is, by definition, out of a job. A teacher can help direct the education of a student who may or may not eventually be a producer, but without a student, is nothing but a schizophrenic talking to herself in an empty classroom.

A miner needs a mine. A farmer needs a farm.

But service jobs need other people to be productive in order for them to perform their service.

Anonymous Procol Harumph October 30, 2012 3:46 PM  

"Exactly who is being semantic. You just used three different words, which describe three different things"

Yes. Very good.

As Pee-Wee Herman once said, "I meant to do that."

The more I read this site, the more I think maybe you guys ought to shy away from all the IQ-deterministic arguments, as I'm not sure they favor a lot of the readership here. Dick-measuring seems to be more the speed for quite a lot of folks.

NTTAWWT.



Anonymous Noah B. October 30, 2012 3:51 PM  

"Wouldn't mind seeing a more rigorous definition to separate these from the real producers."

The line is definitely a bit blurry -- no human produces anything from nothing, but some people produce tangible products that are more valued than the cost of the input products. Some people produce no tangible product but produce valuable, marketable information. Some produce valuable, marketable services. And then there are government employees. Economists are still trying to determine what, if anything, most of them actually do.

Blogger Joshua_D October 30, 2012 3:53 PM  

Procol Harumph October 30, 2012 3:46 PM

As Pee-Wee Herman once said, "I meant to do that."


I know you meant to do that. My point is simply that using different words to describe different things isn't being semantic.

Is Vox being semantic when he points out that teachers do not produce anything and thus have no productive value?

Or do you think robh, adsf and titan are being sematic because they don't understad the difference between production and value and usefulness?

Anonymous Daniel October 30, 2012 3:53 PM  

Oh, really, Procol? Recall that Pee-Wee only ever said that when he didn't actually mean to do something stupid, and I'll agree with your clever retort.

Otherwise, I'll have to believe that you have willfully mistaken the economic discussion on the topic of production for an emotional discussion on the topic of sociology.

Which would mean, by definition, that you've got no idea what you are talking about. Dwarves who go the NBA and tell the players that all they care about is being tall are the same ones who spend their nights in bars, getting tossed.

So, since you obviously didn't "mean to do that," what exactly did you mean to do?

Blogger James Dixon October 30, 2012 3:57 PM  

> Then your job is not really a job! Or something... Because apparently government doesnt create jobs because they aren't productive.

Oh, it's a job. It pays me a salary and everything. It's even valuable to the company. Because it makes the other employees, who actually do produce things, more productive. But in and of itself, it doesn't produce anything. It's a service.

> You guys seem to have a hard time understanding that a smaller negative than otherwise is a positive. Whether you count that towards production or just "value" is largely irrelevant, it's desireable.

No. It's a smaller negative, not a positive. And whether it's desirable or not depends on the cost, as Vox keeps trying to explain.

> Hmm, thinking abou this more, one could say that fire-fighters take the raw-material of burning houses and produce the final product of non-burning houses.

No. Do I really need to point out to people that the job of firefighters is to keep a fire from spreading more so than to put it out? The goals isn't to save the house that's on fire. They'll do so if they can, but the actual goal is to make sure that the fire doesn't spread to other houses.

> A private tutor may do the same thing as a P.S. teacher, but the tutor is undeniably productive (in the opinion of the person paying for their services)

Yet another example of not understanding the difference between production and value.

> We've got people here telling me we'd all be better off if we went back to oxen and plows versus tractors

Since I made the the oxen comment, and I didn't say anything of the kind, you obviously have a comprehension problem.

> Of course teachers and firefighters are technically not "productive", nor net "producers." People are absolutely right to assert that. But it's not the same as saying they aren't "useful" in some way, or "valuable."

Bingo.

Anonymous 691 October 30, 2012 4:02 PM  

Yes, this is true. Because economic growth ultimately depends upon technological advancement. None is possible through a maintenance economy.

So I see you are concerned with economic growth. It's true that teachers, firefighters, etc.. can't do this on their own. At most they maintain what we already have. But it would be disingenuous to claim that maintenance is irrelevant to growth. If we produced tons of tangible goods but they broke faster than they were being replaced that's economic decline, not growth. It's sprinting on a treadmill going faster than you.

Anonymous Procol Harumph October 30, 2012 4:03 PM  

"I'll have to believe that you have willfully mistaken the economic discussion on the topic of production for an emotional discussion on the topic of sociology."

In reality, of course, economics, sociology, and emotionalism all intersect, along with lots of other things, and the combination provides us the basis for what we actually live in. Sometimes we separate them out from one another for a while, to see what that individual analysis will yield; but a discrete analysis will never be a satisfyingly accurate one, so ultimately we have to throw them all back in the tank to swim together, because if we don't, then we aren't really studying reality.

And thank you for your timely update on Pee-Wee Context. You've well earned your Masters Degree in Pee-Wee-ology. Cue "Pomp and Circumstance".

Sheesh.


Anonymous Procol Harumph October 30, 2012 4:09 PM  

"Is Vox being semantic when he points out that teachers do not produce anything and thus have no productive value?"

No, that is a clarification, because Krugman and pals are (whether out of cynicism or hog-wild ignorance I cannot say) conflating the strict sense of "productive" with the general sense of "value" or "usefulness". So that part is not "mere semantics," it's simply the twenty-car pile-up at the intersection which ensues, that is a cause of tedium. The problem is, other people have gotten caught up in this confusion, which has brought any investigative value of the conversation to a slow-down or a halt.

I was just trying to do that Gordian knot-thingy, because 100+ comments in, nobody else had bothered.

No good deed goes, etc etc.


Anonymous Idle Spectator October 30, 2012 4:10 PM  

So a lot of the comments can't seem to get the difference between producing something, and mantaining it.

Car mechanics don't produce anything. The car is produced at a factory, designed by an automotive engineer, and then they mantain it. Still important though.

A construction worker produces the building, the janitor, firefighters, and other staff mantains it. Still important though.

The biochemist sitting in the lab produces the drug, the pharmacist helps mantain your health by doling it out properly (or improperly...). Still important though.


Now, obviously you need a bit of both groups. But the problem is a lot of these mantainers end up just getting in the way as bureaucrats as sustainers of the status quo after they forget their place in the chain.


What... is so complicated about this?

Anonymous RedJack October 30, 2012 4:10 PM  

But service jobs need other people to be productive in order for them to perform their service.


Close. But a good working definition.

Anonymous Jake October 30, 2012 4:16 PM  

Yet another example of not understanding the difference between production and value.

I'm not concerned with some arbitrary distinction you may have with what is production and what is not. The question is/was "are people X, Y, and Z productive" i.e. are they PRODUCING value equal or greater than what they consume. My answer was simply that people who draw a salary from tax dollars are probably generally unproductive but we can't say for certain for any individual, whether they are or not has NOTHING to do with what they actually do and everything to do with whether the good OR SERVICE they provide is worth more to a person or group of people than the salary and expenses paid to acquire that good OR SERVICE.

Seems that in the context of this discussion he word productive either means "On net contributing to the overall production of an economy" or it means "producing a good". If the former then Vox is mistaken to make a blanket statement that all teachers and firefighters (and apparently anyone else who provides almost purely service goods) are unproductive. If the latter then this whole discussion is absurd, like saying chickens don't produce corn, and therefore must be net drain on the economy of the local farm, it's only true if you ignore any contribution other than corn.

Anonymous Idle Spectator October 30, 2012 4:26 PM  

I think people did not read the original post closely enough, and are getting confused between productive and product-tive.

Leading to... "Vox said nurses are WORTHLESS pieces of shit with sprinkles????" HATE! HATE! HATE!

Blogger Joshua_D October 30, 2012 4:27 PM  

Procol Harumph October 30, 2012 4:09 PM

I was just trying to do that Gordian knot-thingy, because 100+ comments in, nobody else had bothered.


Ah ... well, I think that you may be somewhat mistaken in suggesting that no one has tried to explain the difference in the previous 100+ comments.

In fact, RedJack gave it a go in the 16th comment of the thread, just two comments after yours.

RedJack October 30, 2012 11:42 AM

When you get down to it, there are VERY few actual producers in the economy. By that I mean people who produce actual wealth.

Teachers, cops, soliders, bankers, etc. don't produce anything. That doesn't mean the services they provide are worthless, but that they are, by definition, not producing.

It is a very hard concept for most modern people to grasp.

Anonymous Procol Harumph October 30, 2012 4:41 PM  

"In fact, RedJack gave it a go in the 16th comment of the thread"

Well you get a medal for industriousness, now don't you.

Now, quick! Is being industrious 'productive', or not?

Ah, I'm just kidding, it's a trick question.

But you knew that. Hell, it's why you're always racking up all those gold stars and pewter medals. Every Good Boy Deserves Favour.




Blogger Joshua_D October 30, 2012 4:51 PM  

See, I was giving you the benefit of the doubt Procol, but now I see that you're just being an asshole. If you know what your talking about, you're much less likely to look like an asshole, let alone have to start acting like one.

Anonymous Daniel October 30, 2012 4:58 PM  

It wasn't Gordian, Pee Wee. It wasn't even a knot. It was a clothesline, and only the demonstrably stupid (those who didn't comprehend basic terms of macroeconomics) went sprinting into it throat first.

And only you mistook your self-inflicted laryngotracheal trauma for evidence of aborted knot-cutting.

Anonymous Procol Harumph October 30, 2012 5:00 PM  

"If you know what your talking about, you're much less likely to look like an asshole"

And yet here I am, doing both! :-)

Ah c'mon, cheer up. Everybody is so hair-trigger bloody sensitive around here. Sorry if I was too pissy towards you, which I may well have been; I'm probably on too-high alert because the snark-to-seriousness ratio of reaction to my conversation is not what I'd like it to be. I come here for the serious talk, not to trade insults all day long, and yet I find that's how I have to spend half my time.

I'll gladly take it back if you'll lighten up. Deal?

Anonymous Procol Harumph October 30, 2012 5:02 PM  

"only you mistook your self-inflicted laryngotracheal trauma"

You see what I mean, Joshua_D? Look at this fluff.

"Laryngotracheal". Really. That was worth your time to type?

Anonymous Daniel October 30, 2012 5:27 PM  

It was worth your time to copy down one letter at a time, bub. Try not to hyperventilate. You might asphyxiate.

That means "don't breathe hard or you might lose air."

Anonymous Procol Harumph October 30, 2012 5:32 PM  

My motive was different than yours. See how that works?

Anonymous Daniel October 30, 2012 5:37 PM  

Sez the chump who doesn't know what a Gordian knot is.

Anonymous RedJack October 30, 2012 5:52 PM  

Procol Harumph, Titan, et all.

The issue is actually very fundemental to understanding how to build a real economy.

Producers produce things. Real things. Not an insurance policy like a police or fire fighting force. Not a service like a bank. And not a service like a teacher. All the latter things can be good, and even help society grow, but they are by definition, luxeries not needed to sustain life. For that you need
1. Food
2. Water
3. Shelter from the elements

That doesn't make them bad, evil, or negative, but the vast majority of mankind has done without bankers over the years, and they will again.
My job is connected to food. I take a raw material, modify it, and turn it into a product all of you reading this have ingested at some time. We do produce a product (physical thing). The broker we sell to, who then sells to the various customers, does not. He provides a very needed service, and does it better than we can. He makes us more efficent, but he is not a producer.

Does that help?

Anonymous titanofindustry October 30, 2012 6:16 PM  

Ah, so you are the dishonest little worm I suspected. Implying the costs can be determined is not at all what you originally said, which was "you would have no problem, as long as a bean counter was able to show you the spreadsheet that said it was cost prohibitive to have firefighters."

You're either confused or trying to obfuscate. What I wrote is there in the order I wrote it. Go back and read it again.

Anonymous Dan in Texas October 30, 2012 6:22 PM  

I'm just a poor ol' country boy and I understand what Vox was saying in the post. Why do I get the feeling those arguing against are using the "Keep talking around in circles and maybe they'll give up and go home" tactic so common from the left?

Anonymous WaterBoy October 30, 2012 7:00 PM  

I would also point out that there are government entities which are involved in production of such things as clean water and electricity. Delivering these products to consumers is a service, but the power plants and water treatment facilities are still producing the products being delivered.

Regardless of whether or not they should be doing so because private enterprise can produce such commodities more efficiently or economically, it does not negate that some of the public sector is also employed doing the same thing.

Anonymous zen0 October 30, 2012 7:08 PM  

What... is so complicated about this?
Idle Spectator

You vicious beast! You are deliberately raping non-producers feelings!

In a compassionate world, there would be affirmative action for non-producers.

(oh, wait.....)

Anonymous stg58 October 30, 2012 7:20 PM  

THOUGHT EXERCISE!

Q: If a neighborhood has 100 houses, and two of them burn down, how many house are left?

A: 98

Q: If a neighborhood has 100 houses, and two of them catch on fire but the Fire Department saves them from burning down, how many are left?

A: 100

Q: After the Fire Department did its job, how many houses did the neighborhood have?

A: 100

Q: How many houses did the Fire Department produce?

A: 0 (Wrong! On the weekend, the Firefighters volunteer at Habitat for Humanity!)

Q: How many people here are saying that since Firefighters don't make anything they are mean, stupid, nasty worthless people who should be marched out and shot at dawn?

A: 0

Anonymous VD October 30, 2012 7:23 PM  

So I see you are concerned with economic growth.

That is the entire scope of the discussion. Your first clue would have been that it was an argument between Robert Samuelson on the one side and Paul Krugman and Dean Banker on the other.

Value is entirely subjective. You can value sexy nurses more than a Lamborghini if you like. But no amount of nursing will make her activities productive. One of the great diseases of modern economics is its insistence on treating services as if they are products. In fact, that error is one reason why the U.S. economy is so hollow and indebted now.

No, that is a clarification, because Krugman and pals are (whether out of cynicism or hog-wild ignorance I cannot say) conflating the strict sense of "productive" with the general sense of "value" or "usefulness".

Correct. It's Krugman playing disingenuous three-card-monte with the terminology in order to justify more government spending.

Anonymous asdf October 30, 2012 7:39 PM  

Everything we produce today is because of services. In fact services are far more important then raw production. Services have the potential to increase the productivity of "producers" by many orders of magnitude.

If all we have is a guy trying to dig up coal, he's going to dig up very little coal. But if you give him a tool he can dig up a lot of coal. But someone has to design that tool, and that person is clearly providing a "service" in your nomenclature. Without the service you won't be producing a whole lot now will you. In fact the tool rather then the digger is probably a lot more responsible for any coal produced. So should we not credit the person who designed the tool? Should we not credit the person who taught them how to design a tool? Should we not credit the accounts receivable gal who processed the tuition check when the engineer was learning how to design the tool?

These people are the heroic producers. The guy that uses what they have created to become 1000 times more productive then he himself could be is far less responsible for his production then these service providers.

Anonymous stg58 October 30, 2012 7:41 PM  

One of the great diseases of modern economics is its insistence on treating services as if they are products.

Not only that, but also the disease of accusing those who claim that services are not products of being evil, murderous barbarians and **NOT CARING!!!** (The most evil sin of all).

Anonymous stg58 October 30, 2012 7:42 PM  

But someone has to design that tool, and that person is clearly providing a "service" in your nomenclature.

Wow, now we have reached the other side of the argument, calling products services. I feel like I am in Wonderland.

Anonymous stg58 October 30, 2012 7:46 PM  

Should we not credit the person who taught them how to design a tool? Should we not credit the accounts receivable gal who processed the tuition check when the engineer was learning how to design the tool?

What if the guy who designed the tool taught himself tool design? What if he also did his own accounts receivable functions?

Anonymous VD October 30, 2012 7:48 PM  

Everything we produce today is because of services. In fact services are far more important then raw production. Services have the potential to increase the productivity of "producers" by many orders of magnitude.

You're confusing "services" with "technology". A designer produces a product, he does not provide a service. It is called a "design" and it falls in the category of a capital good. The very example you chose, the digging tool, is also a capital good.

So should we not credit the person who designed the tool? Should we not credit the person who taught them how to design a tool? Should we not credit the accounts receivable gal who processed the tuition check when the engineer was learning how to design the tool?

In answer to your questions: yes, no, and no.

Anonymous VD October 30, 2012 7:50 PM  

Wow, now we have reached the other side of the argument, calling products services. I feel like I am in Wonderland.

If you've noticed, we often get to this point when people simply will not admit or cannot see they are wrong. Once their own arguments are demolished, they have little choice but to concede or try to appropriate mine. The more insane it gets, the more clear it is to those reading the discussion which argument is correct.

Anonymous stg58 October 30, 2012 7:53 PM  

The very example you chose, the digging tool, is also a capital good.

In my industry, oil and gas, capital projects are projects which produce something ( a new process unit, capabilities, plant or pipeline) that wasn't there before. Every other kind of project simply replaces or upgrades previously existing equipment or processes.

Anonymous stg58 October 30, 2012 7:59 PM  

Ok, Krugmanites, here is a good question for you. I am a salesman. I sell high dollar, very specialized process analytical equipment for a living (Gas Chromatographs). Not surprisingly, I live in Houston, Texas.

Do I produce anything? After all, without me, the customer would not buy the product! All the engineers, applications specialists, chemists, circuit board manufacturers, tubing producers and other parts makers would go out of business.

DO I PRODUCE ANYTHING?

Anonymous Jake October 30, 2012 8:00 PM  

My job is connected to food. I take a raw material, modify it, and turn it into a product all of you reading this have ingested at some time. We do produce a product (physical thing). The broker we sell to, who then sells to the various customers, does not. He provides a very needed service, and does it better than we can. He makes us more efficent, but he is not a producer.

It's a totally arbitrary distinction though. I understand you may disagree, but just because what you produce is more obvious than what your broker produces doesn't mean he's not producing something.

You produce a good, say corn. Great, you manage the land, plant seeds, add water, sunlight, time, etc and you eventually get corn. That is your product. It's easy to see that. But your broker is producing something too, not corn specifically, but corn in a more buyer-friendly format. He "produces" it in a larger quantity than any one farm can provide, or he "produces" corn available year round instead of only for a month or so around harvest, or he produces corn available in the nearby city instead of on your farm. But he is producing something and you say yourself that your business would be less productive with out him. Just because you can't necessarily take a picture of what he produces doesn't mean he hasn't produced something.

Like I said above, you can define "production" narrowly to mean only developing a tangible good, but it makes no sense to do so. If we were all producing by this definition we wouldn't be richer but much poorer. There'd be nobody doing the job of your broker, nobody figuring out how to build a better tractor so you can grow more corn, etc. Vox has already said economic growth requires technological development, what is the "product" of the people doing such development? Let's say an engineer develops a means of getting 2 extra horse power from the same engine burning the same amount of gas, what is his production? By this non-sense definition of "tangible goods" it's nothing, by a more realistic definition it's millions of dollars worth of gasoline available for other uses that would have otherwise been used up, less the costs of development and implementation.

Anonymous Jake October 30, 2012 8:01 PM  

I am not, NOT, defending the vast numbers of parasitical people who truly do (as a whole) produce far less than they demand in return, I am not defending the smaller number of people who ANTI-PRODUCE, actually creating destruction by their labor, never mind the salaries they draw, such as politicians, bureaucrats, "activists" for any number of causes, etc. But all this hog-wash about productive people and non-productive people, defined arbitrarily by the existence of some physical product, is just distracting anyone who buys into it from the real nature of the situation. The farmer is not in some kind of class struggle with his broker, the assembly line worker is not in some kind of class struggle against the engineering team who designed what he has a part in building, none of them necessarily are at odds with someone who puts out fires or teaches (even if in our current system this tends to be the case). The conflict, the REAL class conflict, is between the productive people (broadly and properly understood as those who create value, not necessarily a tangible good) and the parasites who steal from the productive class.

If you get paid to do something, or make something, by someone voluntarily then you are a productive member of society (at least in the payer's opinion, which is the one that matters). If your getting paid out of taxes, or run a business catering to government contracts, or a business that only exists thanks to government subsidy, privilege, regulation, etc. then while it's logically possible that you could still be contributing to society rather than stealing from it, the presumption has to be that you are a parasite and are only able to make a living based on your access to tax money or the privileges it buys on your behalf.

Blogger James Dixon October 30, 2012 8:02 PM  

> The question is/was "are people X, Y, and Z productive" i.e. are they PRODUCING value equal or greater than what they consume.

No, that wasn't the question. Value and production are not the same thing,

Blogger James Dixon October 30, 2012 8:08 PM  

> Like I said above, you can define "production" narrowly to mean only developing a tangible good, but it makes no sense to do so.

Except perhaps for the fact that the word goes back to the 1400's or so, and that's what it's meant for all that time.

Of course, you're welcome to check the OED yourself: http://oxforddictionaries.com/definition/english/production?region=uk&q=production

Anonymous Jake October 30, 2012 8:24 PM  

No, that wasn't the question. Value and production are not the same thing,

If you're talking about who is productive and who is not, you're talking about value. Who is creating it and who is not. We're not taking about who creates the most of some product (at least not if we want to talk about the economy and how it grows and how it fails to grow). Government bureaucrats may manage a very impressive production of policy statements, new regulatory interpretations, procedural documents, disaster plans, you name it. They may run a press and print a million copies of their work and distribute it to every government building in the nation. That does not make them productive, what they have created is of little to no value. You cannot quantify productivity in any way that is very meaningful EXCEPT by he net value created. If you think differently then you should take lesson from the soviets in the 20's when they actually tried to have production without money (and so without a measure of value). Their production statistics may have looked great, 1,000s of tons of steel, cubic km of concrete, bushels of wheat but nothing got done and people starved en mass. Production IS creating value. Any other definition will lead you astray.

Anonymous 691 October 30, 2012 8:25 PM  

Value is entirely subjective.

My issue was never about the subjectivity of value. At a mathematical level, it's about understanding that some activity adds to levels of wealth/economic growth and some activity multiplies the level of wealth/economic growth (NB this is not a "multiplier" reference). I would summarize your argument as "no positive number times a non-positive number gives a positive number", which is true. You have to start with something positive, some economic growth. But given negative growth, we can attempt to make it as little negative as possible and that gives improvements vis a vis the alternative. Decreasing the rate at which products deteriorate has a multiplicative effect on some portion of wealth levels.

If you think that modern theory is obsessed with the multiplicative/service portion at the expense of the additive, leading to less growth, I understand. But the former can be enormously powerful, if some positive growth is already happening.

Anonymous Jake October 30, 2012 8:35 PM  

Except perhaps for the fact that the word goes back to the 1400's or so, and that's what it's meant for all that time.

Of course, you're welcome to check the OED yourself: http://oxforddictionaries.com/definition/english/production?region=uk&q=production


Oh, thanks for clarifying. And I suppose your going to tell me that in our economics discussion "land" means the surface of the earth. And talk about water supply and lumber and mineral deposits is in contradiction to the definition the OED. We're talking economics here, the OED isn't particularly relevant.

Besides, I've defined what I mean by production quite clearly, if you'd like to recommend a better term I'm all ears. I've also stated why that is the only definition that makes sense in this context, if you'd like to challenge my claim there go ahead. Let's not be all cutesy quoting a dictionary. You might as well tell an umpire that according to the OED the word "ball" has nothing to do with the location of a pitched baseball relative to home plate.

Anonymous HH October 30, 2012 9:08 PM  

You can't argue VD's points about products and services -- its fundamental... but his point is a sidestep to the real argument being discussed at the top an ---regarding the statement "Government can/cannot create a job"

When we say "the government can/cannot create jobs" what does that mean ? --- because both sides (obama and Romney) are being intellectually dishonest to make a political point (wow .. big surprise)

Governments can create jobs through policy (tax, environmental, trade, public works, defense spending .. the list goes on). Some of these jobs are in the private sector (both products and services) and some are in the public sector (services). The converse is also true - governments can and unfortunately do make policy decisions that result in the loss of jobs.

As a entity (a consumer) that uses good and services, they (the GOV) can create jobs as well by their need for goods and services. We can argue all day about whether the usefulness of the government to exist but that is another thread...

As an entity that provides those services that the private sector is not willing to provide (due to lack of profit, or a reasonable cost) but that we (the people) deem important (like fire fighters, police, public works, soldiers etc) they create jobs ... again.

Now does the government set up factories to build product ? .. no they normally don't .. in fact -- the government is precluded from doing that specifically in the FAR...





Anonymous asdf October 30, 2012 9:50 PM  

Then your definition is absurd. People don't have designs pop into their heads out of nowhere like this is an Ayn Rand novel. They have to be taught the skill of design. And if they learn it from a book then the person writing that book had to learn it from someone. And when they go to buy the book the accounts receivable person has to process their payment.

Vox, the economy your describing without all of these "service provider parasites" is a terrible one. It rejects all development of human capital and human systems which are the linchpin of our entire productivity. It would descend into subsistence farming.

Anonymous rycamor October 30, 2012 9:52 PM  

VD October 30, 2012 7:23 PM

One of the great diseases of modern economics is its insistence on treating services as if they are products. In fact, that error is one reason why the U.S. economy is so hollow and indebted now.


It is ironic that a Krugman would see me toiling at my garden and view it as an economic negative because I would be purchasing less vegetables from the grocery store, AND I don't directly earn money for this work, but if I were to become, say, a corporate "image consultant" charging $5K/day that would be an economic positive. I'm sure that if the economic collapse doesn't come quickly enough we will see the day that private gardens are restricted.

Anonymous Jake October 30, 2012 10:04 PM  

It is ironic that a Krugman would see me toiling at my garden and view it as an economic negative because I would be purchasing less vegetables from the grocery store, AND I don't directly earn money for this work, but if I were to become, say, a corporate "image consultant" charging $5K/day that would be an economic positive. I'm sure that if the economic collapse doesn't come quickly enough we will see the day that private gardens are restricted.

Interesting how everything Krugman sees as good for the economy results in taxable transactions, while things like growing your own food is very difficult to tax. Interesting but probably not coincidence.

It wouldn't be the first time people were told they couldn't grow their own food by the government. Nor would it be hard to do now given all the infrastructure created to bust drug production. I'm sure when that day comes folks growing their own tomatoes will be cleverly associated with people growing pot, opium, etc. (The master mind of 5k/day "image consultant" type people). That way your proud-to-be-an-american flag waving conservative and your pro-civil-liberties-except-ones-I-don't-like left-liberal will report you to the police and take half your food as a bounty rather than quietly offering to buy some of those tomatoes.

Anonymous 691 October 30, 2012 10:12 PM  

In principle, firefighters may not produce anything per se, but they clearly add to net total stuff by limiting the extent of damage by fire.

Reading back over this post, I realized I used "net" incorrectly. Fire fighting constitutes a gross gain, not a net gain. I was thinking of the gain as a difference of two numbers and reflectively used "net", then I doubled down on failure. Apologies.

Anonymous stg58 October 30, 2012 10:34 PM  

Reading back over this post, I realized I used "net" incorrectly. Fire fighting constitutes a gross gain, not a net gain. I was thinking of the gain as a difference of two numbers and reflectively used "net", then I doubled down on failure. Apologies.

691,

I still disagree with you. Even if the firefighters go above and beyond, you still have just as many structures as you did before the fire started. The firefighters still have not produced anything.

Anonymous Toby Temple October 30, 2012 10:35 PM  

Firefighters produce what?
Nurses produce what?
Teachers produce what?

Blogger James Dixon October 30, 2012 10:57 PM  

> If you're talking about who is productive and who is not, you're talking about value.

No, we're not. You may be, but most of us understand the difference.

> Oh, thanks for clarifying.

You're welcome.

> Besides, I've defined what I mean by production quite clearly,

Possibly. It's a long thread and I'd have to go back and check. If so, I'm fairly certain no one else agrees with it though.

> I've also stated why that is the only definition that makes sense in this context, if you'd like to challenge my claim there go ahead.

I have no interest in "challenging" it. I also have no interest in accepting it. Most people here are using the standard definition. You're apparently not. Hooray for you.

> They have to be taught the skill of design. And if they learn it from a book then the person writing that book had to learn it from someone.

Sigh. In which case we've obviously never been able to design anything, since there was no one to teach the first designer.

Anonymous Anonymous October 30, 2012 11:03 PM  

asdf,

"Then your definition is absurd. People don't have designs pop into their heads out of nowhere like this is an Ayn Rand novel."

I call BS on that. Some of my farmer friends who have patented inventions simply saw something with a flaw in its design, or they saw a need for some kind of tool/device to do a task, and designed it in their head, then built it with their own hands.

Recently I built a device for lifting sow crates. I simply thought about what I needed and built it from scratch. In no way did any outside party have anything to do with the finished product.


farmer Tom

Anonymous Jake October 30, 2012 11:33 PM  


Firefighters produce what?
Nurses produce what?
Teachers produce what?


Firefighters reduce the damage associated with fires in structures.

What they "produce" are structures that are still usable, or material within the structure that are salvageable, that would otherwise have been complete destroyed. Lets do a comparison:

No firefighters: 10 structure in a town of 10,000 buildings (make up your own numbers if you like) burns down every year. The town either has 9,990 out of 10k buildings after a year or resources are spent to replace an adequate building that could have been used on a new building.

With firefighters: 3 structures still burn down completely (total loss), 3 are damaged beyond repair but some contents, equipment, stores, etc are salvaged, 3 suffer significant damage but are repairable, most of the contents are salvaged. 1 structure does not suffer a fire at all because the fire fighters contain the neighboring blaze before it can spread to this structure.

The "production" of the firefighters then would be the salvaged contents of the 3 heavily damaged build , the value of the 3 repaired buildings (less the costs of repair of course), and the value that would have been lost in damage to the 10th building.

Note that I am NOT trying to prove that firefighters as they currently exist are productive, I've already said they should be presumed NOT to be. But it has nothing to do with the fact they provide a service rather than a tangible good or that they maintain capital rather than create it. IF in my scenario the salary and equipment needs of the firefighters for a year came out to LESS than the buildings and resources that weren't destroyed thanks to their efforts then yes they have produced for the economy and improved the economy.

To argue otherwise is going to take you to some weird conclusions. Are the people who paint the Golden Gate bridge productive? They don't create anything, the thing's already the same color that they're painting it again. Well, without a continual effort to keep all that steel painted the bridge would probably have rusted to ruin at this point. Their efforts take something that would have lasted maybe 40 years and make it last 200 years instead (just speculating on numbers) Is a 200 year life span more valuable than a 40 year life span? There's you're productivity.

Nurses produce services you wouldn't want to pay for a doctor to provide. Who wants to pay some doctor $200/hr to weigh you and check your blood pressure?. You get the service for cheaper, you're better off, yes?

Teachers (again, in theory here, not our current reality) produce better educated children. You want your kids to know stuff, don't have time to do it yourself, you hire at teacher or send your kid to a school and teachers impart knowledge. I've already said I consider teachers as a whole parasites on the productive economy so don't get sidetracked by how bad schools are, I know. The point is, IF you hired a private tutor, or IF you sent your kid to a private school by your own choosing, that tutor/private school teacher is (in the opinion of you or the school) a productive teacher whose instruction is more valuable to the parents/school than the cost of employing the teacher.

Anonymous Jake October 30, 2012 11:34 PM  

A few more for you:

What does a truck driver produce?
What about a CNC operator?
What does a doctor produce?
What about a pastor?
What about an author?
A car mechanic?
A housing inspector?
A professional athlete?
A restaurant owner?

I'm trying to show that the line some of you imagine exists between production and not-production is not just fuzzy and difficult to see but totally non-existent. There is NO distinct difference between good and service, it's a gradient, there are plenty of pure-service fields, a few (not many) pure goods, and a billion things in between. And anyone who thinks they can improve the economy by pushing more activity to one end or the other doesn't appreciate just how ignorant of the workings of a highly developed economy they (inevitably) are.

As I've said before, the important distinction is not between who produces goods and who produces services... which I've tried to show can't really be cleanly distinguished anyway, but who creates value and who consumes it. I have no doubt that teachers consume far more from the economy than they contribute back, in many cases their "contributions" may NEGATIVE, how many kids are worse off for their school experience before we even get into looking at the cost to tax payers and the opportunity-costs to the student? BUT, this stems from the compulsory nature of the schooling and the compulsory funding of schools. There is nothing inherent in the job of "teacher" that necessitates "tax parasite and drain on the economy". All the more so with a fire-fighter. Does your typical fire-fighter getting paid to sit around at a station 90% of the time represent a productive member of the economy? Probably not, but we don't know because there's little market for a free-market fire service and people are forced to pay for the gov. fire dept. whether they like it or not. In a big city with closely spaced and older buildings a property insurer might well figure out that spending $1M a year on a fire service will be cheaper than paying out $5M in claims without a fire service instead of $3M with the fire service. Were that the case, the fire fighters would be productive... they "produced" for their employer a net gain of $1M. They "produced" for the economy as a whole $2M worth of stuff not needing replacement and consumed only $1M in the process.

Anonymous Toby Temple October 30, 2012 11:45 PM  

Firefighters reduce the damage associated with fires in structures.

That does not answer my question - Firefighters produce what?

Nurses produce services you wouldn't want to pay for a doctor to provide.

Again, you are confusing "what X do" from "what X produces".

Teachers (again, in theory here, not our current reality) produce better educated children.

Wrong. Even in theory, a teacher teaches. And teaching is the process of transferring knowledge. It does not produce anything.

Its like saying that transferring $X from bank account X to your bank account is actually producing $X.

Anonymous Toby Temple October 30, 2012 11:50 PM  

What does a truck driver produce? Nothing

What about a CNC operator? Nothing

What does a doctor produce? Nothing

What about a pastor? Nothing

What about an author? A book or books

A car mechanic? Nothing

A housing inspector? Nothing

A professional athlete? Nothing

A restaurant owner? The Restaurant

Anonymous Johnny Caustic October 30, 2012 11:57 PM  

What I have learned from this thread:

(1) People don't know what the word "productive" means. They think it's a synonym for "beneficial" or "good". Hint, people: a "product" must be physical and tangible. Educations and services are not "products".

(2) When Samuelson (or Vox) tries to make the important point that physical, tangible goods can only increase if physical, tangible goods are produced, people's egos require them to immediately change the subject. Even though it was never said or implied that services and intangibles are contempible, everybody rushes to defend the value of services and intangibles, rudely ignoring the point that was being made.

Thus we see why liberals have their blind spots and behave as if tangibles rain from heaven, even if they actually know in the depths of their brains that they don't. It's a topic they simply can't think about. If it's brought up at all, the emotional response of their amygdalas forces them to immediately change the subject.

Anonymous Jake October 31, 2012 12:00 AM  

No, we're not. You may be, but most of us understand the difference.

Then most of you have no understanding of economics. But go ahead and worry about who's building the most nails and growing the most grain and manufacturing the most widgets and pay no attention to whether or not these things are actually valued in the form you find most convenient to produce them. Declare yourself God that you can figure out how to produce all the millions of things people want from all the millions of inputs available. If you could implement that idea (to call it a system would be giving it too much credit) most of population unfortunate enough to be subject to your plan would be half-naked and starving in streets within 5 years. If you're not thinking about value created and lost, i.e. profit and loss, you're not thinking about productive effort in an rational way. There is absolutely no other way to look at it.

Your definition of production seems to be "resulting in a product" OK fine, but the context is what is good for the economy and what is not. If you are talking about the wealth of the economy you must be talking about value. A Ford Focus is a product, a Chevy Volt is a product, one is almost certainly a benefit to the economy the other almost certainly not. The difference is that one is more valuable to consumers than the inputs needed to produce it, the other is definitely NOT. A diesel generator and a solar cell are both products, one makes us wealthier the other (except in off-grid VERY low-power applications) makes us poorer, the difference is the VALUE of each and the VALUE of everything consumed in producing them.

Now then, which is more "productive" for the economy, the company making nearly useless solar cells that can't be sold profitably even with massive subsidies, or the salesman at your local hardware store? One's making a product, the other is not, but one is destroying value, the other is creating it. If you're not talking about value your not talking about economics. If you ARE talking about value, then these arbitrary distinctions between "product" and "service" are inconsequential.

Anonymous Toby Temple October 31, 2012 12:04 AM  

(1) People don't know what the word "productive" means. They think it's a synonym for "beneficial" or "good". Hint, people: a "product" must be physical and tangible. Educations and services are not "products".

Productive also means yielding results.

But since we are talking about economics here, then your definition is the one that counts.

Anonymous Jake October 31, 2012 12:23 AM  

(1) People don't know what the word "productive" means. They think it's a synonym for "beneficial" or "good". Hint, people: a "product" must be physical and tangible. Educations and services are not "products".

(2) When Samuelson (or Vox) tries to make the important point that physical, tangible goods can only increase if physical, tangible goods are produced, people's egos require them to immediately change the subject. Even though it was never said or implied that services and intangibles are contempible, everybody rushes to defend the value of services and intangibles, rudely ignoring the point that was being made.


Actually productive means exactly what I've been saying:

(http://dictionary.reference.com/browse/productive)

"1.having the power of producing; generative; creative: a productive effort.
2.producing readily or abundantly; fertile: a productive vineyard.
3.causing; bringing about (usually followed by of ): conditions productive of crime and sin.
4.Economics . producing or tending to produce goods and services having exchange value. "

The only amendment I might make is when I say something is productive I'm assuming that it's exchange value is greater than the value of it's inputs.

You are also retreating here a great deal. Vox said much more than you claim:

Suppose that everyone was either a schoolteacher, a firefighter, or a nurse. How much wealth would be collectively produced by them? Absolutely nothing.

Their productive value is zero.


Vox of course speaks of this stuff in terms of value and wealth even though most of you seem to think that's not at issue here, it's the very heart of the issue.

"Their productive value is zero". All I said way back up at the top is that this is not necessarily the case. It may be generally true under current conditions (I agree it is), but it has nothing to do with the fact they don't make a tangible good and everything to do with the fact that what they produce ain't worth what they cost. This is NOT a natural attribute of teachers, firefighters, nurses, or any other provider of a service but the result of these specific fields being largely segregated from market discipline and control.

Anonymous Bohm October 31, 2012 2:39 AM  

VD's argument appears to hinge on the word 'produce', which he helpfully capitalised in case we didn't get the point. Although there's not a single firefighter, teacher or nurse who would agree with him, he's is not actually taking a swipe at them so much as the 'left-liberal elites' who believe that such people might PRODUCE something of value. That is, a tangible material PRODUCT.

However, Klugman didn't write PRODUCE, he wrote PROVIDE.

"Do you really want to say that schoolteachers, firefighters, and nurses provide nothing of value?"

The distinction may be irrelevant to VD, but I would suggest that Klugman's argument hinges on the word VALUE not the transitive verb that precedes it.

The idea that nurses, fighters et al are 'societal luxury goods' who provide no value is stupid, frankly. IF VD had said management consultants, interior designers, haute couture and game developers were 'societal luxury goods' I might have been persuaded. But that wouldn't chime with his ideological conviction that nothing government provides has value, by definition.

Far be it from me to put words in VD's mouth, but I suspect that if fire services were privatised, they would suddenly, miraculously, start producing 'value', in his view.

As it happens, fire services, as constituted in the US, were once private enterprises based on insurance subscription and salvage. In those glory days, competing fire 'services' would often set the fires themselves and rival operations haggle over payments as properties burnt to the ground.


Anonymous Bobo October 31, 2012 5:05 AM  

Bohm, with increasing services (more teachers, more gender studies professors, more firefighters) but decreasing production - fewer cars, TVs, computers, screwdrivers, etc. made in the USA and exported, we've seen your economy go down the toilet.

Anonymous Bobo October 31, 2012 5:09 AM  

Toby:

"A professional athlete? Nothing"

Unless you can capitalise on his fame and sell more $5 "Made in USA" t-shirts at $39.99 abroad or sell rights to broadcast US based events where he appears to foreigners.

Anonymous Toby Temple October 31, 2012 5:40 AM  

Bobo said... Unless you can capitalise on his fame and sell more $5 "Made in USA" t-shirts at $39.99 abroad or sell rights to broadcast US based events where he appears to foreigners.

Then it must be "A popular professional athlete" for that to be possible.

Anonymous Bohm October 31, 2012 5:48 AM  

with increasing services (more teachers, more gender studies professors, more firefighters) but decreasing production...

The two are not mutually exclusive. I agree that gender studies professors are economically speaking superfluous, but not all professors are gender studies professors. Many professors, for example, specialise in computing -essential for the manufacture of computers, perhaps even of screwdrivers.

Further to my last comment: VD's argument confuses 'wealth" with "value". It is easily demonstrable that the two terms are not only separate, but can often be conflicting.

Anonymous Paradisum October 31, 2012 6:46 AM  

VD: "late '80's "produce wealth through services" concept that any reasonable person knew was nonsense at the time."

IOW, a national service economy produces a nation of servants.

Much of the discussion here reminds me of the inevitable arguments that occur when deciding whether something is valuable to a process, non-value added or non-value added but essential.


Anonymous RedJack October 31, 2012 7:08 AM  

Jake,
The broker is providing a service. He is not producing anything.

There is a difference. The broker does not provide a product in any real sense, he is providing a service. As I said, a good and needed service, but to be honest one that we used to do ourselves. Just yesterday there was discussion of moving that service to an in house person in order to cut costs.

Anonymous Bobo October 31, 2012 9:06 AM  

Bohm:

"The two are not mutually exclusive. I agree that gender studies professors are economically speaking superfluous, but not all professors are gender studies professors. Many professors, for example, specialise in computing -essential for the manufacture of computers, perhaps even of screwdrivers."

Well despite more professionals specialising in computers, USA is manufacturing fewer computers, TVs, cars, screwdrivers, etc. So while the two are not entirely exclusive, it is obvious all the PC BS has not helped America and outsourcing manufacturing abroad while keeping teaching, burger flipping and liposuction locally is not making positive changes. BTW Bohm it could be considered sexist and insensitive of you to suggest that gender studies' professionals are in some way superfluous, shame on you. You're obviously insensitive to the value these people bring in for women and other gendered persons.

"Further to my last comment: VD's argument confuses 'wealth" with "value". It is easily demonstrable that the two terms are not only separate, but can often be conflicting."

Has the value of the US economy gone up or down since the 50s?

Blogger James Dixon October 31, 2012 11:03 AM  

> Then most of you have no understanding of economics.

If I truly understood economics, I'd be the one writing the economics blog posts, not Vox. But I think it's fairly obvious to most of the readers here that my understanding is at least as good as yours.

No one here is arguing that services don't have value. No one is arguing they're not necessary to our existing economy. We're merely noting that they're not production.

> OK fine, but the context is what is good for the economy and what is not.

The context is what is production and what is not.

Blogger Joshua_D October 31, 2012 12:02 PM  

Jake October 30, 2012 11:34 PM

I'm trying to show that the line some of you imagine exists between production and not-production is not just fuzzy and difficult to see but totally non-existent. There is NO distinct difference between good and service, it's a gradient, there are plenty of pure-service fields, a few (not many) pure goods, and a billion things in between.


This is wrong, and this is why most everyone on here is disagreeing with you. There reason this is wrong is related to one of your following sentences:

As I've said before, the important distinction is not between who produces goods and who produces services... which I've tried to show can't really be cleanly distinguished anyway, but who creates value and who consumes it.

Let's start with that sentence. People don't consume "value." Value is simply a subjective ordinal preference that we give to two different goods. Say I have a silver coin and small piece of granite rock. I value the coin over the rock. A sculpture may value the rock over the coin. Either way, no one is consuming any value.

What you are talking about is wealth/goods. Only tangible wealth/goods can be consumed in the common understanding of consumption. And tangible wealth and goods are required first before any service can be given.

For example, let's say I am a barber. You come and get a hair cut. You give me $1. What exactly has been produced and what has been consumed? Your hair is trimmed, and you gave me a dollar, but nothing has been produced. In fact, your current wealth has declined, and mine has increased by $1. But no new wealth was created.

You gave me $1 and you "consumed" my time, but no new net gain of goods/wealth was created.

Anonymous Jake October 31, 2012 12:24 PM  

To say people create/consume value may be sloppy use of words. create or destroy would be better. But substituting wealth for value doesn't work because we clearly don't agree on what wealth is.

I absolutely do NOT agree that there is no increase of wealth in your haircut example however. You're definition is too narrow. Why would you pay to get a haircut if you're not better off with the haircut than without? Are you financially more wealthy no, but we're not JUST talking about finances or accumulation of tangible goods. You go to get the haircut because you expect to be happier after the haircut than before. You are wealthier than you were before. By your thinking it makes no sense for anyone to pay for anything that's not a tangible good, as if money spent on services is just wasted and gives no return to the spender.

What you are talking about is wealth/goods. Only tangible wealth/goods can be consumed in the common understanding of consumption.

Disagree, why would you say this? Consumption is the end-goal of all economic production of all sorts, not just widgets, iron, and food but intangibles as well.

Blogger Joshua_D October 31, 2012 12:34 PM  

Jake October 31, 2012 12:24 PM

create or destroy would be better.


Not really. Value is subjective. It's not objective. Value is simply preference. It can't be created, but it can change.


I absolutely do NOT agree that there is no increase of wealth in your haircut example however. You're definition is too narrow. Why would you pay to get a haircut if you're not better off with the haircut than without?

Why do you keep switching between words? Having wealth and being "better off" is not the same thing. People may prefer to use their wealth to pay for a service they want which they believe makes them better off, and happier (which also isn't the same thing as "wealth" or "better off"), but that doesn't mean the person who paid for a hair cut is wealthier. When you spend/exchange your wealth, you have less wealth.

Blogger Joshua_D October 31, 2012 1:02 PM  

Jake October 31, 2012 12:24 PM

By your thinking it makes no sense for anyone to pay for anything that's not a tangible good, as if money spent on services is just wasted and gives no return to the spender.


What are you talking about? It makes perfect sense for people to exchange their wealth/tangible goods for a service, if they value the service more than their wealth/tangible goods. People do this all day, every day.

Anonymous pdimov October 31, 2012 1:36 PM  

asdf: Everything we produce today is because of services. In fact services are far more important then raw production. Services have the potential to increase the productivity of "producers" by many orders of magnitude.

They certainly have that potential. They also have the potential to not increase it. And they sometimes even have the potential to decrease it. Into which category, in your opinion, do most government services fall?

Blogger jim November 01, 2012 1:26 AM  

An airtight case ... as long as you take it on faith, that is.

All it takes to refute it is to flip the equation: if there were no firefighters, teachers or nurses, how much capital would a nation without them lose? Your blind spot as to the very real market value of preventing loss of capital is showing - as is a brutal case of economics FAIL.

Someone's got a Magic Thinking problem, alright - but it isn't Krugman. Supply-Side Economics was rightly classed as nonsensical "Voodoo" by Pappy Bush back in 1979-1980, but it was Voodoo that made the right people a ton of quick & easy cash - so its inherent fallacy has been wilfully ignored for decades, with gruesome (& predictable) results. This kind of fiscal myopia is why the GOP never grows the job market in anything approaching proportionality to economic growth, produces less of that growth even with optimal conditions to do so - & always massively balloons the debt.

Interesting that the public sector workers of the Armed Forces are mysteriously omitted, even though they provide only a vague abstraction of security (at best) for what is by now a truly astronomical price, while siphoning epic levels of manpower, skill & resources away from the private sector, & would thus make the best defence for this thesis.

As for the meme of government producing nothing worthwhile, anyone taking time out from their busy window-licking schedule to make this case over what was originally DARPAnet is nothing if not hilarious.

Anonymous Anonymous November 01, 2012 1:02 PM  

my god, Vox. how can you be so wrong? whether or not a job is productive has nothing to do with whether its a tangible good. a good or service that generates more in revenue than it costs to provide that good or service produces a profit, and therefore is productive.

a firehouse can be productive if its private. lets say a private firehouse operates in a town that has 50,000 homes (we'll ignore businesses for the example). if 25,000 of those households subscribe to the firehouse at $20 per month, thats $6 million in revenue per year. now if it costs $4.5 million to operate the firehouse, then thats $1.5 million in profit ANNUALLY. and thats just one firehouse in a small town. how can you possibly say firefighters dont have any value?

if people are willing to spend their money on a good or service, then by definition, it MUST have value. and if it turns a profit, it is productive, because it produces more than it consumes. (charities, on the other hand, have value, since the donations are voluntary, but are not productive). the same goes for teachers and nurses. the problem today, of course, is that firehouse are not private. they once were, but local governments drove them out and then took over. same goes for police, sanitation, schools, etc. they were all municipalized, then unionized, in order to create a dedicated voting bloc to keep politicians in office. the public sector employees, in turn, were paid enormous benefits that they never would have gotten without taxpayers to bleed.

this comes back to the original point. it is IMPOSSIBLE for the government to create productive jobs. the government does not operate on a profit motive, but on a political one. someone mentioned the private sector vs public sector "debate." i say that in quotes because its not a debate. there is no good or service the government provides that the private sector cant provide at higher quality and lower cost. the public sector costs way more because of bloated bureaucracy and union leaders, and its shittier than it otherwise would be.

not only all that, but the PUBLIC SECTOR DOES NOT PAY TAXES. the government could just as easily pay their wages after taxes, thereby eliminating any costs preparing tax forms. but that would give away the fact that the public sector depends on wealth transfers, rather than on wealth creation like the private sector. the whole thing is nothing more than an accounting identity. the private sector pays for the wages of BOTH the private sector AND the public sector.


also, someone mentioned the firehouse that let a man's house burn down. that was NOT private. it was a government-run firehouse. you know when you hear such a stupid story that empty-headed bureaucrats were involved. the guy in question was willing to pay 10 times the annual subscription fee to save his house. the mayor rejected it and the firefighters just stood there as the house burned to the ground. its just another example of how incompetent the government truly is.

Anonymous WaterBoy November 01, 2012 1:29 PM  

jim: "As for the meme of government producing nothing worthwhile, anyone taking time out from their busy window-licking schedule to make this case over what was originally DARPAnet is nothing if not hilarious."

It is important to note the distinction between direct production and funding of that production. Yes, ARPA was responsible for creating ARPANET, but the lion's share of the development was performed by private industry, either through research grants or direct contract. In fact, the initial Interface Message Processor (IMP), which was the backbone of the network, was developed by BBN (Bolt Beranek and Newman) under contract to ARPA.

"Government" no more directly produced ARPANET than they currently produce nuclear carriers, military aircraft, tanks, or satellites, which are actually built by General Dynamics, Boeing, Lockheed, etc.

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