Tuesday, December 15, 2009

Some starter economic lessons for the man in blue turban

Cafe Hayek's Donald J. Boudreaux has a piece in Pittsburgh Tribune-Review that has some important lessons for us in India as our 'eminent' economist-in-chief in blue pug(turban) leads us down the path of economic folly of NREGA-
Such (make-work)policies can indeed transfer wealth from society at large to people whose jobs exist only because government relieves them of the need to participate fairly in the market process. But such "jobs" clearly are not "value-producing opportunities" -- for the amount of value that such workers produce is less than they are paid.
Read the rest of the damn good piece.However I can't help but excerpting this, since so many economists just seem to ignore plain commonsense-

Jobs are not scarce. They never have been. They're all around us. There are far too many of them ever to be done.

My house needs to be painted. I'd enjoy having a personal masseuse. I'd love to employ a live-in housekeeper to cook my meals and clean my home each day. These are jobs that can be done -- indeed, jobs that I wish would be done.

Will you do them for me?

The correct answer, I'm sure, is "It depends." It depends upon what I offer to pay you in exchange for your services. Because I'm unwilling to pay you as much as you would demand to perform these services for me, you're not tempted to accept my job offer.

The reason you refuse my offer of a (full-time!) job is because what you really want is not the opportunity to toil for someone else but, rather, the income that you can earn by toiling.

No matter how prestigious the job, few of us are willing to toil unless we're paid to do so.

The reverse, of course, isn't true. Nearly all of us are willing to be paid without having to toil for it.

Only a moment of reflection is necessary to make clear that no society can survive if significant numbers of its denizens try living without working -- without producing. So the reverse course of action -- being paid without working -- is impossible to generalize. It's impossible to establish such a course of action as a general policy open to all.

To survive, enough food, clothing and shelter must be produced to nourish and protect society's members. And for members of that society to thrive, they must together produce not only adequate amounts of life's necessities, but also large amounts of an increasing variety of goods and services that add diversity, richness and comfort to their lives.

To promote such economic growth, markets ensure that people are paid only when -- and always when -- they produce value for others.

Thank you , Don, for the refresher. Now if only a certain 'eminent' economist in blue head gear could comprehend!