Does Government Create Jobs?

Many people have been talking about job creation lately, especially politicians. But is government the best creator of jobs? And is job creation the best thing for the economy? Professor Steve Horwitz explains that there is a difference between creating jobs and creating wealth. It would be easy to create millions of jobs overnight. For example, we could eliminate all of the machinery and innovation used in agriculture. Then many people would be needed to farm in order to produce sufficient food for society. But no one is suggesting that because it is not practical and it would set our economy back 100 years.

Creating jobs is relatively easy. The problem is that the most economic progress is made when jobs are eliminated as they become unnecessary. New innovations happen gradually, though, and technological innovation means people will need to learn new skills, and some are likely to lose their jobs in the meantime. That unemployment is a bad thing, but the alternatives are worse. To prevent such labor transitions would halt innovation, growth, and the reduction of poverty.

Market signals can indicate what kind of skills people should invest in and where the new jobs of the future will be. But the government doesn’t have these signals. Instead, many government job-creation programs are really about meeting the needs of politicians, not the needs of consumers in the marketplace. “The best job-creation program in human history is the free market and the entrepreneurship it generates,” Professor Horwitz says.

5 Comments

  1. Ryan Boyd

    It is a great point that we really need economic progress, not new jobs. There was a time when everyone had jobs in agriculture simply because that was the only way you lived, but we didn’t live well. And in truth, when a position is eliminated and an industry streamlined, people will adapt and we will get a better society because of it. We may not like change, but it is the only reason we live in such a luxurious world today.

  2. taschrant

    This might be one of the most important videos of this whole site.  1:30-1:46

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