Monday, March 01, 2004
Production over employment
Rajesh has been posting some of Atanu's thoughts on economic development on his blog. In the third installment, Atanu writes about increasing rural incomes, but more importantly about why production is more important to an economist than employment. This is a very crucial and important distinction, a distinction that escapes a lot of policy makers and thinkers. Therefore, I reproduce the second part in full here. This is excellent, excellent stuff.
Production, rather than employment, should engage our policy makers more than it currently does. Why? Because if you don't produce — irrespective of how many people you employ — you cannot distribute. Even if you distribute scanty production very evenly, you are left with a system that fails everyone.
Mechanisation and automation expands the 'production possibilities frontier' and thus we can get more out of less — mostly less labor. Is that good or bad? Let me use a simple example. You can have 10 rickshaw pullers delivering transportation services through back breaking labor 12 hours a day. Or you can use autorickshaws and employ only 2 people who work in relative comfort to provide the same services. Hypothetically you could have every one of those 10 former rickshaw pullers work only one day every 5 days and earn the same as before. On the other four days they could (1) spend time with family, or (2) learn to make pots, or (3) learn arithmetic, or (4) play the santoor, or (5) take care of his aging parents, or (5) contemplate the universe, ...
Now if you are more interested in 'employment', of course the hand pulled rickshaw is a more attractive system for you. To some, those were the good old days when you did not have the 'dark satanic mills', when you had simple country living with horse carriages providing the transportation, and the cooling was done by fans hand-pulled by shapely maidens as one reclined on a diwan eating grapes, I guess. But in those days scanty little was produced and of that, the rich and the powerful got the lion's share and the unwashed masses simply starved.
What has happened since those good old days? The economy has changed structurally. And that structural adjustment has produced more goods and services and having produced more, more people have a shot at living a less brutish, short, nasty and mean life. However, adjustments don't come for free. There is a cost and that cost mostly falls on those whose services become redundant in the new production system. Typist and shorthand pools have disappeared. Instead we have web designers. People who are concerned about employment alone would have advocated the banning of research into computers and electronics to save the livelihood of typists and stenographers.
For my money, I would go for a system that is hell bent upon production and having produced, hell bent upon an equitable distribution. Given scarce resources, the most efficient production method is most desirable. If that means more computers in banks, so be it. So you have to lay off bank clerks. But if you look around, humans are somewhat inventive and entrepreneurial. The system adjusts -- not smoothly or costlessly -- but eventually. And if done with sufficient forethought, without too much pain.
We have to get away from this fixation with employment and get more focused on production. We have to use the most efficient and effective tools that modern technology can provide to increase our production. And there will be enough people left over who can use their time to figure out how to distribute most equitably the stuff that is produced.
Production, rather than employment, should engage our policy makers more than it currently does. Why? Because if you don't produce — irrespective of how many people you employ — you cannot distribute. Even if you distribute scanty production very evenly, you are left with a system that fails everyone.
Mechanisation and automation expands the 'production possibilities frontier' and thus we can get more out of less — mostly less labor. Is that good or bad? Let me use a simple example. You can have 10 rickshaw pullers delivering transportation services through back breaking labor 12 hours a day. Or you can use autorickshaws and employ only 2 people who work in relative comfort to provide the same services. Hypothetically you could have every one of those 10 former rickshaw pullers work only one day every 5 days and earn the same as before. On the other four days they could (1) spend time with family, or (2) learn to make pots, or (3) learn arithmetic, or (4) play the santoor, or (5) take care of his aging parents, or (5) contemplate the universe, ...
Now if you are more interested in 'employment', of course the hand pulled rickshaw is a more attractive system for you. To some, those were the good old days when you did not have the 'dark satanic mills', when you had simple country living with horse carriages providing the transportation, and the cooling was done by fans hand-pulled by shapely maidens as one reclined on a diwan eating grapes, I guess. But in those days scanty little was produced and of that, the rich and the powerful got the lion's share and the unwashed masses simply starved.
What has happened since those good old days? The economy has changed structurally. And that structural adjustment has produced more goods and services and having produced more, more people have a shot at living a less brutish, short, nasty and mean life. However, adjustments don't come for free. There is a cost and that cost mostly falls on those whose services become redundant in the new production system. Typist and shorthand pools have disappeared. Instead we have web designers. People who are concerned about employment alone would have advocated the banning of research into computers and electronics to save the livelihood of typists and stenographers.
For my money, I would go for a system that is hell bent upon production and having produced, hell bent upon an equitable distribution. Given scarce resources, the most efficient production method is most desirable. If that means more computers in banks, so be it. So you have to lay off bank clerks. But if you look around, humans are somewhat inventive and entrepreneurial. The system adjusts -- not smoothly or costlessly -- but eventually. And if done with sufficient forethought, without too much pain.
We have to get away from this fixation with employment and get more focused on production. We have to use the most efficient and effective tools that modern technology can provide to increase our production. And there will be enough people left over who can use their time to figure out how to distribute most equitably the stuff that is produced.
