Friday, December 21, 2012

Are monopolies back? Part 3

Part 3: What is the role of a business?
In their article, Mr. Lynn and Mr. Longman lament the "consolidation" of America's businesses and blame said consolidation as a cause of the current jobless recovery. In my previous posts I provided some evidence and reasoning that shows that "monopolies" are not as bad for consumers as people think. But what about for workers?

It could be reasonably argued that more consolidation means less employers which means less competition for workers. This is one of the arguments put forth by Messieurs Lynn and Longman. But have we really reached that extreme point? I think it is quite a stretch to say that there are not enough potential employers for most occupations. Off the top of my head football players, basketball players, baseball players and other athletes might have a few complaints (Note that the NFL, MLB, and the NBA have some antitrust exemptions granted to them by Congress. There is that government monopoly thing again...). But computer programmers? Lawyers? Investment Bankers? Cooks? Dentists? Teachers? Mechanics? Analysts? Do any of these occupations really suffer from a lack of employers? I personally do not think so.

Regardless of how one feels about the current amount of employers, a more fundamental question is whether it is the responsibility of firms to create jobs. I do not think that it is. The purpose of a business is to make the owners money. They do that by creating a product or service that people value. Jobs usually accompany the production of a new job or service, but that is not and should not be the reason someone starts a business. If jobs are truly our goal as a society, then we should give our construction workers spoons instead of bulldozers. Similar substitutions could be made in other professions.

When economists talk about the labor/leisure decision, labor is a bad. Leisure is everything people do that does not involve working. Working i.e. labor is what people do so that they can consume. People only work to consume. You might be thinking "hey wait, I like my job". And maybe you do. But I doubt you would continue to do every aspect of your job if you had a billion dollars. The parts of your job that you like you could certainly continue to do as a hobby and it would fall under leisure. But the paperwork, the emails, the nagging boss, the deadlines, etc., that could all go away. I think that even the people that love their work would give up the annoying parts if they could.

In my opinion the ultimate goal of society should be to have machines making all of our consumer goods. Machines can work 24 hrs a day with no breaks or vacations. Goods would be cheaper and much more prevalent. People could focus their time and energy on more service oriented jobs or on inventing new products to help people live better lives. Time, energy, and human capital are scarce resources. There is no need to waste them on doing things that machines can do.

We do not need nor should we desire a world where people do monotonous factory work for 40 hours a week. Yet our politicians and media tell us that the loss of factory jobs is a terrible thing. I understand that the factory jobs of yesterday paid more than the jobs of today, but much of that wage premium was a union fantasy and the result of a temporary period of American dominance in a post WWII world.

As a society we should be happy to see China, India, Indonesia, and other developing countries increase their standard of living and join the modern world. Instead we yearn for the days of old when Americans were doing the same boring, tedious, factory work now being done in those countries.

Progress will always create winners and losers, with the winners far outnumbering the losers. Hopefully we will reach the point where we desire the return of the auto assembly line worker as much as we desire the return of the blacksmith.

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