Newbies

Re: "Public" employees

Graham Wright — Sun, 09 Jan 2011 01:41:24 GMT

Here's my example. You and I are going for a drink. For simplicity, suppose all drinks cost the same price. If we both choose our own drinks, we will both end up with the drink we want, say lager. But if I take your money from you and buy the drink I think you should have, there are two possibilities: I might buy you lager, in which case the end result is the same, or I might buy you something different, e.g. cider. If I bought you cider, then you have suffered a loss in utility ex ante because by definition we choose what we value highest (i.e. what we expect to get the most utility from).

So whether any particular public employee lowers utility and by how much depends on what people would have chosen if they had the choice to spend their money as the wished (rather than having them taxed away from them). Of course, they didn't have a choice, so we cannot possibly know what they would have chosen. It's really all guesswork...

You may be interested in my powerpoint presentation based on Hazlitt's book: Economics in One Lesson: Wars, Governments, Price Controls and the Boom-Bust Cycle.

Re: "Public" employees

Aposiopesis — Sat, 08 Jan 2011 20:06:18 GMT

I would say that if a (useful) service is being offered (even inefficiently as in the manner of the state), then they do contribute to a certain extent. For example, department of transportation workers carry out a service which is used and useful (even though it could be done more efficiently and with more innovation in the free market, not to mention the whole involuntary financial contributions thing). On the other hand, (the roles/labor of) people who are receiving redistributed wealth to redistribute wealth (such as the IRS)... entirely worthless. The value of roles such as those within organizations such as the Dept. of Homeboy (financial) Security is also questionable.

Re: "Public" employees

Kaiser434 — Sat, 08 Jan 2011 19:59:27 GMT

It seems obvious to me that public employees of the sort you are describing (school teachers and I'd like to think paramedics) are producing and contributing to the economy. They are producing goods and services that are legitimate (as opposed to the IRS) and just happen to be working in a field that has been co-opted by force. That does not mean that there is a net increase in that contribution. In the case of government intervention it is entirely likely that we're in a situation of "one step forward and two steps back" because of all the government structures and inefficiency involved. I'd actually take that as a given, It's certainly true within my own field. I don't have numbers and can't compile them (Because HIPAA laws mean I can be imprisoned for telling you too much about my job) but I can assure you that a huge majority of patients I see as a paramedic are of questionable need and would not be requesting the service if they were expected to pay for it. So just because the transactions in my field are legitimate and productive economically the fact that the gov is there pointing guns and redistributing wealth pretty much screws everything up.

Re: "Public" employees

bionic mosquito — Thu, 30 Dec 2010 01:07:32 GMT

ImagesandWords:
Do "public" employees contribute to the economy at all since their paychecks are essentially just redistributed wealth? If so, how? If not, how (Would this be similar to "the broken window fallacy?)?

Most important question. Are you a fan of Dream Theater?

On to your question. I would say if the function is one that would have demand absent government intervention (streets, for example), then the answer would be yes. This doesn't say it is efficient or moral, it doesn't say that the contribution might have been greater if delivered by another means. And certainly the street might not be in the most efficient location.

This is not to diminish the issue of inefficiency. Any inefficient method to deliver a desired good is destructive to an economy relative to an efficient method. This would be true for private business as well as government. The benefit in a free-market economy is that the private business would go bankrupt, minimizing the damage overall to the economy.

Re: "Public" employees

John Q — Thu, 30 Dec 2010 00:50:53 GMT

Thank you all for your input and feel free to post any material you believe may be relevant to this topic on top of the recommended Hazlitt (which I have already begun reading).

Re: "Public" employees

Prateek Sanjay — Wed, 29 Dec 2010 07:34:26 GMT

A public sector job like a worker in a supplier of electricity is a contribution to the economy, since it involves the sale of goods on the market and their purchase by customers without compulsion, with most capital raised by tax-exempt bonds and earnings from electricity charges. Assuming no monopoly on electricity.

A public sector job like a public schoolteacher or public school staff is a little more difficult to assess, because it is mandatory by law to send your children to a particular school in most industrial countries, and because she is rather in charge of spending other people's money for the sake of other people. Meaning that she has to neither economize on other people's money, nor seek the highest value while spending it.

Re: "Public" employees

John Q — Tue, 28 Dec 2010 04:17:26 GMT

I will read Hazlitt. Thanks.

Re: "Public" employees

Isaac "Izzy" Marmolejo — Tue, 28 Dec 2010 04:02:22 GMT

i highly recommend you to read 'Economics in One Lesson" by Henry Hazlitt... seriously, best intro to econ... he writes about what he claims to be necessary taxes and how it does not damage production for society, yet he is very critical about government's power.... not all Austrians are anti-state, and Henry Hazlitt just happens to be one of those people that favors a government... Hayek is also a good reference

Re: "Public" employees

John Q — Tue, 28 Dec 2010 03:49:36 GMT

And yes, I suppose it's obvious that I'm largely (mostly?) economically illiterate and somewhat (very?) confused by this proposition (I'm being self-deprecating here)!

Re: "Public" employees

John Q — Tue, 28 Dec 2010 03:37:18 GMT

I'm sorry, this needs to be clearer for me. I'm not trying to be argumentative or stand-offish, so let's break this down for the sake of argument: If I go to my neighbor's house and take some of his money so I can spend it in the way(s) I see fit, as opposed to allowing him to do it, how does this reflect a net gain?

Re: "Public" employees

Isaac "Izzy" Marmolejo — Tue, 28 Dec 2010 03:29:27 GMT

im sure they can provide some benefit in public school ... but you limit the private sector again... in general though, it is not something you can just look up using empirical evidence...

Re: "Public" employees

Agamentus — Tue, 28 Dec 2010 03:24:13 GMT

ImagesandWords:
Well, I am thinking specifically of "public" school teachers here, (unionized, of course), and maybe I am not being clear as to what I am asking: Is there a NET INCREASE in the economy in a situation like this or is Metus correct that we cannot know?

Educators are tricky to quantify in this case because they are producing something - (ideally) smarter and therefore more productive students. It doesn't require much effort, however, to discover instances where the public educational system is struggling, and I think that's actually putting it lightly.

Perhaps in direct answer to your question, *technically* yes, but you have to be very specific in which public field you're referring to. Just good luck trying to make any kind of accurate measurements. And as was mentioned already, most people here can provide an eloquent and convincing argument as to why private solutions trump public alternatives.

Re: "Public" employees

John Q — Tue, 28 Dec 2010 03:08:01 GMT

Btw, this is a phenomenal site!

Re: "Public" employees

John Q — Tue, 28 Dec 2010 03:04:42 GMT

Well, I am thinking specifically of "public" school teachers here, (unionized, of course), and maybe I am not being clear as to what I am asking: Is there a NET INCREASE in the economy in a situation like this or is Metus correct that we cannot know?

Thank you for your examples also.

Re: "Public" employees

Isaac "Izzy" Marmolejo — Tue, 28 Dec 2010 02:35:38 GMT

do public employees contribute to the economy?

It depends on the specific job you are talking about... if the government decides to make the Auto industry public, then all the employees would be public employees... they are contributing to society by making cars. If all hospitals were Government owned, all their employees would be considered public, there is still contribution to society... there is an opportunity cost here, the cost is that you limit the private sector, which is 1000x's more efficient and productive than government or any of their public services because the private sector relies on the market, and the market never fails...

The fallacy explain something different. The 'broken window fallacy'' explains how Governments and/or some economists praise destruction because it ''creates'' jobs... for example, "The BP oil spill was awful, but lets look at the bright side, more jobs will be created. We will need people to pick up the dead animals from the shore, we would need people to clean the area, etc..." But this doesn't create jobs at all... Economics In One Lesson by Hazlitt explains this in far more detail, you should check it out... It is also the best intro to economics in my opinion...