An Open Letter to Ezra Klein

For those of you who may be asking who is Ezra Klein, he writes a blog for the Washington Post that explores economic and domestic policy. We are more inclined to think he is a spokesman for Obama and his Administration on economic policy with some of his articles.

When has slowing productivity been good for the economy? That makes no sense at all, but we have a hard time remembering when we have seen a liberal write an article about the economy that made sense. From what we gather if a company lays off workers and the productivity goes down, they will want to hire more workers.

We see it differently. If an employer has less employees, they have less overhead to worry about so slower productivity doesn't mean that much to the overall bottom line. In fact, in most instances, remaining employees will pick up slack for those laid off and productivity will stay at or near the same. There are some situations where productivity will improve as a company gets rid of dead weight. Unions have been a big reason for the drop in productivity in our opinion as they have encouraged laziness in a lot of instances and loyalty to the union not their employer. The overhead companies pay to leadership of the union is outrageous since they get zero productivity out of them.

Only in a liberal socialist world would falling productivity be good for the economy.

An Open Letter to Ezra Klein
by Don Boudreaux on May 7, 2010

Dear Mr. Klein:

You allege that when unemployment is high, a slowing of productivity growth is “good news” for the economy (“When bad economic news is good news,” May 6). The reason, according to you, is that the greater the number of workers required to produce a given amount of output – everything from a Starbucks’ latte to a Boeing 747 – the higher is the is the demand for workers.

The relationship between productivity and demand for workers isn’t this simple. (If your employer, the Washington Post, suddenly lost access to the Internet and found itself stuck with vintage 1890 printing presses, are you sure that the Post would hire more workers to compensate for its drop in productivity?) But assuming your premise to be true, why rely only upon unguided forces to reduce worker productivity? Shouldn’t government help this beneficial process along – say, by requiring that each employee drink three martinis before reporting to work?

Not only are drunk workers less productive than are sober ones, they’re also more likely to damage equipment. So mandating employee intoxication promises a helpful double-whammy during these recessionary times: employers would hire more workers to produce any given amount of output, and employers would hire more workers to repair damaged equipment. Presto! Unemployment problem solved!

Shall we drink to this proposal, Mr. Klein?

Sincerely,

Donald J. Boudreaux

(HT to Andrew Moylan for alerting me to Klein’s celebration of falling worker productivity.)

Source: Cafe Hayek