Is job loss at the state and local government level bad for the economy?

Excerpts from

People focused only on economic macro indicators like GDP and unemployment claim job loss at the state and local government level is “hurting [economic] recovery.” Indeed Government cutbacks are bad news for those who only think in these terms. Government purchases—like hiring more workers—add directly to GDP, and if extra government hiring drew at all from the ranks of the unemployed, it would also reduce the measured unemployment rate.

So it would seem that in order to get GDP up and unemployment down Government could merely hire all unemployed people at whatever price it takes to induce them to “work”. The higher the pay the better. Of course, anyone with a lick of common sense would ask, who is going to pay them and what are all these Government workers going to do: Dig holes and fill them in again?

Pundits who lament the declines in government employment fall for one of the classic blunders in economics: looking only at the short-run effects of a policy on some people, but ignoring the long-term effects on everybody else. See Henry Hazlitt’s Economics in One Lesson.

Economic health is not simply the percentage of people drawing a paycheck, and the dollar value of total “production.” What matters is this: Are people doing the best they possibly can with their limited time, talents, and resources to serve the limitless wants of their fellow human beings? If not, how do things need to change? What impedes people’s ability to do great things?


4 thoughts on “Is job loss at the state and local government level bad for the economy?

  1. I have not watched the video but based only on your initial explanation I see the potential for what I would consider a major flaw in thinking.

    I don’t believe that happiness can be measured because value is subjective. No onlooker can effectively assign a value to another individuals happiness. Jim can say he is a 3 one the imaginary happiness scale and Sue can say that she’s a 5 on the imaginary happiness scale but there is no way anyone can say that Sue has 2 units more happiness. That’s because happiness doesn’t come in standardized, compartmentalized units.

    I wrote this a few weeks ago. It touches on this idea.

    “I contend that prosperity is not something that can be measured. Prosperity cannot be compared in the way that you might add and subtract numbers. I believe that the root of prosperity is simple. One is prosperous to the extent that he believes that he has acquired those things in life that are of most value to him.”

    “So because prosperity is subjective and only the individual can determine for himself how prosperous he feels his efforts have been, it must be true that in order to achieve prosperity, man must be free to invest his own resources towards ends that he values most. Only within this framework of freedom can society hope to be prosperous. ”

  2. The government which governs best governs least.

    If government were to research happiness and come to the conclusion that, in order to maintain optimal happiness, it had to significantly reduce the scope of it’s interference into the personal lives of it’s subjects, I would agree with their findings.

    If, on the other hand, government set out to measure societies happiness and thought they could maximize happiness through legislation, I would say they are mistaken. See the concept of “Gross National Happiness.”

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