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John Whittington wrote: I am struggling a bit to understand how employing more 'non-productive' people at public expense can improve the economic situation. I suppose that employing those additional people gives them 'spending power' (in theory good for the economy) - but when that spending power comes from money that is necessarily ultimately taken (by taxation) from others who would otherwise have that spending power themselves, I again struggle to see the economic benefit! The point is to transfer spending power from those who might attempt to "save" it to those who will either (a) use it to invest in productive capital (which is likely to mean government-financed infrastructure, given low profitability/company attempts to rebuild financial balances), or (b) spend it on current consumption (in other words, the poor - or "working families" in New Labour jargon) Put another way, it is about transferring income from those with low to high income-elasticity of consumption. One could (and possibly should also) increase benefits, but employing "non-productive" teachers, nurses, policemen, etc., etc. gives one the benefit of the services they create -- and insofar as the services are improved education, public health, etc., constitutes investment just as much as does Crossrail (which I see the Tories are muttering about cancelling, thus ensuring wholly unproductive and very large holes in the ground at Tottenham Court Road and other places where work has been under way for months). In the first para., "save" is in quotes because of Keynes's "paradox of thrift", which shows that in certain circumstances attempts by households and firms to increase the *proportion* of income that they save (= "not consume") will succeed by lowering income, rather than increasing the volume of saving. Julian Dr Julian Wells Acting Director of Studies School of Economics staff web-page: http://fass.kingston.ac.uk/staff/cv.php?staffnum=287 personal web-site: http://staffnet.kingston.ac.uk/~ku32530 Senior lecturer in economics School of Economics Faculty of Arts and Social Sciences Kingston University Penrhyn Road Kingston-upon-Thames KT1 2EE United Kingdom +44 (0)20 8417 2285 From: email list for Radical Statistics [mailto:[log in to unmask]] On Behalf Of John Whittington Sent: 15 April 2010 14:42 To: [log in to unmask] Subject: Re: [RADSTATS] Moreorlesswatch 97% - "Nearly every one of 1.67m jobs created since 1997 has gone to a foreigner" At 09:54 15/04/2010 +0100, Paul Spicker wrote (in part): The central economic argument is that the demand for labour depends on the level of economic activity, and engaging more people in the labour market consequently tends to lead to a greater demand for employment. However, at a time when most politicians seem committed to reducing jobs and spending, which can only plunge us deeper into a slump, I'm pessimistic that that argument will get a hearing. Whilst I can understand the logic of that argument in relation to 'productive' profit-making employment, I'm not sure that I understand how it would work in relation to the sort of 'non-productive' public sector 'service' posts (essentially civil servants) which are primarily what those politicians 'seem committed to reduce'. I can think of a very few exceptions, where taking on more such employees might have a positive effect on government finances (e.g. jobs created to reduce tax avoidance/evasion), and maybe hence the national economy - but, apart from that (and the reduction in benefits which these people might get if not recruited into new civil service jobs), ... but, then, I'm not an economist, so I guess I would struggle to understand these things, wouldn't I?!! Kind Regards, John This email has been scanned for all viruses by the MessageLabs Email Security System. ****************************************************** Please note that if you press the 'Reply' button your message will go only to the sender of this message. If you want to reply to the whole list, use your mailer's 'Reply-to-All' button to send your message automatically to [log in to unmask] Disclaimer: The messages sent to this list are the views of the sender and cannot be assumed to be representative of the range of views held by subscribers to the Radical Statistics Group. To find out more about Radical Statistics and its aims and activities and read current and past issues of our newsletter you are invited to visit our web site www.radstats.org.uk. *******************************************************