The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Pointing Out the Obvious: They Don’t Teach Economics at Harvard Law School

Posted on | June 15, 2011 | 77 Comments

Conveniences you’ve enjoyed for decades have suddenly become a cause of long-term unemployment:

“There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.”
Barack Obama

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The president is attempting here to offer a simplistic explanation of the difference between cyclical unemployment and structural unemployment. As important as that distinction is, however, it fails to explain many obvious things about this recession.

Unemployment isn’t at 9% because of out-of-work bank clerks and airline ticket agents. Unemployment is most severe in construction trades and other housing-related sectors. Whatever else Obama’s policies have done, they have not led to a meaningful recovery of the housing market and, one might easily argue, have made things much worse. Why? Because for two years, the administration and Democrats in Congress did everything possible to impede the foreclosure process, to keep deadbeats in homes they can’t afford. This has slowed re-sales, prevented mortgage lenders from cutting their losses on bad loans and, in general, hindered the kind of price “re-set” necessary to making the housing market efficient again.

Something else: The recession is not equally bad everywhere. Why is unemployment nearly 12% in California but less than 6% in Oklahoma? Don’t people in Oklahoma use ATMs and automated airline ticket kiosks?

Finally: ObamaCare places mandates on employers to provide health insurance to their employees. And by so doing, it increases the cost of hiring people. Whenever government policy makes something more expensive to do, people will do less of whatever that something is, and ObamaCare is a classic example of that. It’s like a good news/bad news joke: The good news is, your employer is now required to provide you health insurance. The bad news is, you ain’t got a job.

You don’t have to be a genius to figure out why Obamanomics doesn’t work. It’s one of those things that is so obvious that it takes a special kind of stupid not to see it.

And I guess they teach that special kind of stupid at Harvard.

UPDATE: Professor William Jacobson (who teaches at Cornell, not Harvard) explains that the President’s perspective “is a perfectly static view, which would have protected jobs in the buggy whip industry by preventing the creation and expansion of the auto industry; would have protected jobs at glass tube manufacturers against the advent of flat screen televisions; would have barred the creation of the cell phone industry because of all the jobs lost in the land line business, and so on and so on.”

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