Misleading metrics, growing pains, and creative destruction

The problem with the entire discussion is that jobs are being used as the only measure of the “good” done by Romney. Profits are also good as they allow companies to grow and as they return capital to investors who can then fund the creation or growth of other companies. Indeed, despite our being surrounded by Keynesian-thinking politicians who believe that nothing is as important as consumers having spending money, the indirect benefits to society of profits to investors are arguably at least as large as the indirect benefits of employment.

It’s another one on the self immolation in the Republican party on the topic of capitalism: Ross Kaminsky on Creative Destruction, Properly Understood.

If you want tomorrow to be different from today, some things of yesterday will have to go away. There will be growing pains as that happens. Horses and their infrastructure (including all the jobs that were a part of it) disappeared from cities as automobiles took over. Many farmers have lost jobs as the productivity per acre and per man-hour has increased many-fold due to better knowledge and better machinery and better techniques. Many times, the only way to find out what works and what doesn’t is via trial and error. Losing the error is being called ‘creative destruction.’

As Cox and Alm put it, “The disruption of lost jobs and shuttered businesses is immediate, while the payoff from creative destruction comes mainly in the long term. As a result, societies will always be tempted to block the process of creative destruction, implementing policies to resist economic change.

“Attempts to save jobs almost always backfire. Instead of going out of business, inefficient producers hang on, at a high cost to consumers or taxpayers. The tinkering shortcircuits market signals that shift resources to emerging industries. It saps the incentives to introduce new products and production methods, leading to stagnation, layoffs, and bankruptcies. The ironic point of Schumpeter’s iconic phrase is this: societies that try to reap the gain of creative destruction without the pain find themselves enduring the pain but not the gain.”

The current campaign is all about abandonment of principle for the appeasement of an electorate assuming that that electorate can only see short term gratification. With record setting budget deficits and financial difficulties and a European example of the end game in the spotlight, worries are becoming near frantic in some circles. The sort of political opposition typified in the attacks on capitalism on feed those worries.

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