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How to Create a Job: Creating Value, Not Just Work

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Milton Friedman was once travelling in Asia and he observed the canal being built. He didn't see any heavy equipment making the canal. Instead he saw workers with shovels, lots of them. And he asked the government official who is with him: Why don't these people have heavy machinery? And the official said: You don't understand, this is a jobs program. Milton supposedly replied: Well then you should take away their shovels and give them all spoons. There are lots of jobs programs around D.C. including new proposal from the president. Of course, we all want unemployment to go down. But the key is, how we make it go down. It shouldn't be forced down by simply creating jobs, that don't create any value for anyone in society. Jobs themselves they are not end goal. The goal is the value that the job creates. Now, I doubt any of the jobs proposal that come out of D.C. they're gonna propose putting workers to work using spoons. But they will have the economic equivalent: jobs that don't create value. After all the government could create the job by paying someone to just dig a ditch and fill it back in, but in the end no value will be created for anybody. In fact, value would be destroyed, because the government would have to tax other people, other places in order to create those jobs and those taxes would destroy other jobs, that create value. Some jobs may create value, others would not. But all of it is ultimatelly not checked by the price system. That means instead of explicit jobs programs what the government should focus on is providing the right institutional environment for growth. That environment is economic freedom. Economic freedom means low taxes, small scope of government, lower inflation, strong protection of property rights, less regulation. Almost the oposite of what the federal government has been doing last two years. When you grant an environment of economic freedom, entrepreneurs make investments to provide value for people in the economy. In order to do it they have to hire workers. When entrepreneurs are working on the market, what they are doing is looking at where can I hire labour inputs and other inputs to create a good or service that consumers going to value. If in the end the value that consumer places on it, measured by how much they're willing to pay for, is greater than the cost of the labour and other inputs, the entrepreneur creates job. The best job program really isn't the job program at all, it's a growth program.

Video Details

Duration: 2 minutes and 16 seconds
Country: United States
Language: English
Producer: EconomicFreedom.org
Director: EconomicFreedom.org
Views: 187
Posted by: smtex on Sep 19, 2011

With unemployment still above 9 percent, Americans are searching for answers that will lead to quality, lasting jobs. Past failures of jobs programs show that addressing the symptom instead of the disease has yet to lead to real job growth. Instead of talking about jobs programs, what needs to be discussed is how to provide the right environment for growth: economic freedom. Watch this video to learn more.

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