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American (Un)Productivity

28 July 2010 One Comment

The American economy is fascinating.  Despite the fact that we no longer build as much as we used to, it’s still considered a big economy.  If you consider that jobs that manufacture goods that the rest of the world wants as productive jobs (not an official definition), it’s insane to think of how many people are employed with unproductive jobs – including me.  The American economy is full of service-based jobs, while some assist productive jobs, many others are parasites on them.


Consider the millions of Americans who are lawyers.  While an attorney is a respectable profession and one that is an important part of society, it’s undeniable that America has turned into an over-litigious society.  Frivolous lawsuits are everywhere and they take away time and money from productive means.  You can sue somebody for anything these days – regardless of how ridiculous the suit is.

How about the IRS?  They have over 100,000 employees and that will grow (even the health care reform bill increases the size of the IRS).  How much time do small businesses have to spend dealing with the IRS and keeping their taxes straight?  Because of the IRS burden upon millions, there are also millions of accountants (again, another service job).

The reality is that simple reforms would change both of the above examples drastically.  Implement a loser-pay type situation and frivolous lawsuits would become minimal; simplify the tax code and the time required to do taxes drops considerably.

A common argument against such reforms is that it would put accountants out of business or the IRS would lay off tens of thousands and then more people would be out of a job.  This is a terrible argument and is a prime example of the fallacy regarding employment.

Max Employment vs. Max Production

Too many people believe maximum employment to be the main goal of economic policy.  This is false.  The main goal of economic policy should be maximum production.  Max production brings in the max amount of wealth into the country which fuels growth, taxes, etc.

For example, if max unemployment were the end goal, we could employ a gazillion people to dig a hole and then another gazillion people to fill it back up.  Why don’t we do this?  Because it’s completely unproductive and results in zero economic gain.  Unfortunately, too much of our economic policy is just this.

The reality is that we should restructure our economy and make it more productive even if it means a million fewer accountants, a million fewer IRS agents, and a million fewer lawyers.  The government should not be in the business of trying to keep certain industries afloat (i.e. American auto industry).  Would it have been productive to keep the industry that produced wagons afloat a few hundred years ago?  Of course not.

Economic restructuring requires pain for some.  It means some unemployment.  It means some retraining and learning of new skills.  It means entire industries might vanish.  This is the market moving an economy forward.  It shouldn’t be resisted.  If it is resisted, the economy will fall behind other economies and possibly stay in an economic downturn for a prolonged period of time.  This is exactly where we find ourselves today.

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