Matt Yglesias has a delightful way of thinking about how the jobs of the future will unfold. It starts with a smart way of looking at the "decline" of existing sectors and extrapolates. Smart and - as Virginia Postrel would say - very dynamisty ...
Meanwhile, one needs to understand that, somewhat counterinuitively, when you have a very efficient economic sector what happens is that it tends to go away. Consider agriculture. Our modern-day agricultural technology is way better than what was available 200 years ago. But agricultural progress hasn’t meant that everyone goes to work in the super-charged high-tech agriculture of the future. It’s meant that more food than ever is grown with fewer person-hours of labor than ever. We should expect this to continue apace. For all the talk of trade’s impact on American manufacturing, the bigger issue has been automation and robots. But either way, even though people will continue to consume manufactured goods—just as we still eat—manufacturing will be a less-and-less important part of the economy.
But then he has this clunker: "But there are lots of fields of endeavor in which markets don’t work well." And he wraps up his analysis with this:
What will be left is big government. Or, rather, bigger and bigger government. Teaching kids. Taking care of the elderly. Patrolling the streets. Making the SUPERTRAINS run on time. And it’s going to be fine.
Really? Let's name the fields that the market fails.
"Health care, you fool! The U.S. needs a national health care system!" (those are the voices of leftist crowds that read our blog).
"National security! Police! And it's high time to expand our roads." (those are the voices of the right-wingers that throng here).
OK, just stop. In almost every case where somebody tells you there is a need for public goods because of a market failure, they neglect to imagine how the ends could be more efficiently achieved by government either (a) designing a better market to correct the failure or (b) financing the good, but leaving production to market suppliers.
And if you think health care in the U.S. is a the best example of a market failure, you really have no idea how deeply involved the government is. Or maybe you haven't heard of Medicaid. Or the tax code's treatment of health expenditures. Congress could fix medicine in America in one fell swoop, like Alexander at Gordia, by forcing income taxes to account benefits as normal income.
Likewise, if you think we need more traffic cops, I'd like to introduce you to new-fangled technologies called GPS and the red-light camera. Policing will go the way automation in many ways. As for the military, let's remember how well nation-building worked in Iraq before Petraeus shifted back to basics, and don't forget that the strength of the military is its workforce which has been organized by market-based pay instead of coercive conscription. It's hardly a perfect institution, but it will get better the closer it moves to market design instead of command & control.
Actually, the big areas that don't work very well in America are places where government is most deeply involved. Public education is the prime example. But it's not because of the teachers, or even their unions, it's because of the legal morass that makes everyone risk averse and that puts regulations above the nurturing of children. If public education were organized differently so that children and parents were customers, excellence - and yes, efficiency - would prevail. Instead, thanks to big government, our country routinely destroys lives through the public education system because of an unimaginative anti-market bias.
We know Yglesias is right that factory jobs are automating. We know that goods production is going the way of food production and that in the future, service sector jobs will make up the vast bulk of employment. But you know what? The future is now. Already, 5 in 6 jobs are in the service sector. Take a look at my favorite graphic in 10 years, from the 2003 Dalls Fed's annual report:
But I think Yglesias has a failure of imagination. Just because it's hard to imagine the sectors that have yet to emerge is a poor excuse for suggesting that liberated labor should simply drift into big government make-work.
I can imagine a future where more people work in the private sector -- doing the work demanded by consumers. More gardeners. More scientists. More life coaches. More artists, authors, interior decorators, chefs, and mentors. Matt can see that future, but he can't imagine it will be organized by his fellow citizens instead of a benevolent social planner.
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Addendum: let me spike out the argument that the free-wheeling market for stocks, bonds, and derivatives caused the current recession. Without markets for those things, we would have no boom to bust. Second, I have yet to see a solution to human greed and the recurrence of bubbles that does not kill off human growth, innovation, and progress. But good luck with that. If the point is that we need better capitalism, welcome to the blog. That's the whole point.