Do you want to build a dam or create employment?

Interesting anecdote by Michael Tanner.

Lately, there is a concern over rising inequality in US and developed world. Politicians feel growth is only rewarding those at the top. The author says we are mixing these two things. High growth should be welcome at all costs and if inequality is rising we should use different tools for the same. But to say growth should be lower does not get us anywhere. In this context he quotes this story from Prof. Milton Friedman :

Lately, on the Left a new strain of thought has risen that questions whether growth is a good thing after all. “Growth shouldn’t be any president’s economic goal,” writes former labor secretary Robert Reich. Reich complains that “almost all the gains from growth have gone to the richest 1 percent.” He goes on to suggest that rather than growing the economy, the government should be concerned with creating more jobs, even if that means sacrificing innovation or efficiency that might benefit the economy as a whole.

Some on the Left are questioning whether growth is a good thing after all.”

There is a story, perhaps apocryphal, about Milton Friedman. While touring China, he came upon a team of nearly 100 workers building an earthen dam with shovels. Friedman pointed out that with a bulldozer, a single worker could create the dam in an afternoon. A Communist official replied, “Yes, but think of all the unemployment that would create.”

“Oh,” said Friedman, “I thought you were building a dam. If it’s jobs you want, then take away their shovels and give them spoons.”

Reich clearly has joined the spoon brigade.


Well, politicians try and kill two birds with one stone. Build the dam and create employment as well. As a result, politics has its own ways of functioning and most dont care for economists who hardly have to fight elections. You have only finite resources to play with, an economist says just use it optimally whereas a politician tries to use it in all possible ways to get voters attention.


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