The Leap of Faith

Economics has this problem with a few of its most powerful ideas: they just SEEM wrong. The toughest of these is the idea of comparative advantage. But another is the idea that destroying jobs is good.

Here’s Alex Tabarrok about how India has too many jobs:

What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.

The politics of growth are difficult because those who lose from change are always present and are often more numerous and perhaps even more deserving than the present winners, the capitalists, the business people, the international mega corps; but today’s losses and gains are fleeting, the permanent winners are the workers and consumers of the future who will know only the benefits of productivity.

There’s another group of people whose losses strongly influence public policy. Always remember Mancur Olsen’s idea: diffuse gains are at a substantial disadvantage when they come at the cost of creating a focused, specific group of losers. The losers will always be more motivated, vocal and effective because they have so much to lose.

Democratic systems are terrible at creating losers.

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