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