In a recession, we speak of jobs being “hard to find” and “the need to create jobs.” As intuitively reasonable as these phrases seem, they run counter to conventional economics.
The goal of an economy is not to create work. What we want is higher productivity, which means that more goods and services can be obtained with less work.
The traditional view of the economic problem is that we have unlimited wants and limited resources. The folk Keynesian view is the opposite: we have resources that are superfluous because of limited wants (low aggregate demand).
When we focus on trade as the central principle of economics, we can resolve this tension. That is, we can explain a shortage of “jobs” even though the economic problem is to try to produce more with less.
The most striking thing about a modern economy is specialization. Most of us produce goods or services that cannot be directly consumed. And all of us consume goods and services that we could not possibly produce.
As an individual, I earn a living by doing a few tasks that do not produce a single item that I consume. Instead, my few tasks allow me to exchange for goods and services that require many tasks. Think for a moment about all of the tasks required to produce a pencil or a toaster.
How many tasks go into the production of the goods and services that I consume in a single day? My guess is that the number is in the millions. And yet I only have to perform a few tasks myself in order to earn the means to obtain these goods and services. That is the miracle performed by complex patterns of specialization and trade.
So I arrive at this definition of a job:
A job is a context for performing a particular small set of tasks that can be exchanged for the means to obtain goods and services produced by a far larger set of tasks.
This definition of a job is consistent with the ordinary intuition that jobs must be “created.” You cannot just do any random set of small tasks to earn the means to obtain the goods and services of the market. That is why I do not define a job as the set of tasks. Instead, I define it as the context in which those tasks are undertaken. Without a context in which the set of tasks adds value, there is no basis for exchange. In order to have a job, you or an employer must discover a context in which sufficient value is created by a particular set of tasks that you are capable of performing.
This definition avoids the suggestion that jobs are lacking because of a scarcity of wants. It also avoids the suggestion that the labor market should be described as a “matching problem,” with employers and potential employees in search of one another. It is a definition of a job that reflects the importance of patterns of sustainable specialization and trade.
I think this is on the right track, but the “context” seems more like the workplace than the job itself.
What about “A job is a position within the context of an institution, by which a particular small set of defined tasks are exchanged for the means to obtain goods and services produced by a far larger set of tasks.”
Because the “position” and the “institution” are simply ways to organize jobs (small number of tasks) to efficiently create the goods and services those individual jobs facilitate obtaining.
If I bake a loaf of bread and then eat it, I’ve done work, but I have not done a job. On the other hand, if I bake a loaf of bread then exchange it with a neighbor or other person for a means to other goods and services, I’ve done a job. If I bake many loaves and engage in many exchanges, I still just have a job. But later, for efficiency, I make take a position called “baker” at an institution called a “bakery” which is set up to not only allow me to make more loaves from my small set of tasks and to make it easier for those wanting a loaf of bread to find my product. Now in either context, I may only mix flour, water and yeast then apply heat to make the loaf of bread. In a large institution, my job may be even more refined into say water measurer, with someone else being the yeast measurer and still another being the mixer, and so on if the institution operates at such a volume so that such tasks can occupy the time the individual allocates to exchange for gaining the ability to obtain other goods and services.
But the purchaser of the loaf is also paying for the contribution of the jobs of the individuals who plowed the field, sowed the grain, monitored the field, harvested the grain, milled the grain, sifted the ground grain for grade of flour, installed the water system, maintained the filters, applied the sanitizing agent, installed and maintain the potable water piping, handles the measurement and billing, grew and packaged the yeast, built the oven, drilled for the gas or operates the power plant, etc., ad infinitum. We can almost without end subdivide what is in the loaf of bread into smaller more specific tasks, even including the growing, grinding, brewing and delivery of the coffee the farmer, driller, linesman, etc. drink.
This is excellent stuff, as is Kling’s superb theory of complex patterns of (sustainable) specialisation and trade (PSST).
James Bessen appears to contribute interesting evidence in support of PSST.
http://www.theatlantic.com/business/archive/2015/04/scarce-skills-not-scarce-jobs/390789/
The vaguery here is sustainable and what makes one thing sustainable and another not and how much this depends on expectations and how interest rates can often turn something sustainable into something not and something not into something sustainable through expectations even though they are not the most important thing. One can treat them as endogenous but it becomes difficult to explain rapid endogenous changes over short terms than elation and panic.
I have proposed Steady-state instead of sustainable. Partly because sustainable has taken on different connotations and partly because I don’t think the denotation captures the meaning.
Sustainable over the market cycle? Even then, plenty of people hit it and quit it and make money over a half cycle and then move on to something else.
I also think a lot of the meaning that is needed is captured by “patterns.” Maybe I just don’t know what Arnold means by sustainable exactly.
The background context matters. We’re talking about societies where subsistence living is not possible for practical or political-economic-legal reasons.
In such societies, one must “earn one’s keep” by doing *something* which the political economy as a whole judges as being of value – that is, doing something somebody will give you money for.
Living entirely from your own labors is not actually an option.
This is functionally the same definition as used in the post (a good defintion by the way) – it just illustrates that jobs are so important because “not able to find a job” is in a very real sense the same as “judged by the political economy as having no value”
I am not sure why you are adding this caveat. There is nothing keeping one of us from going off into the Appalacian Trail or Amazon and living off the land, and if someone did do this it doesn’t change the definition of a job.
Jobs as defined here is an extension of division of labor and exchange. It is based upon the reality that we can produce more value via specialization/integration and exchange than via self sufficiency. We could still choose to be self sufficient (or live in semi self sufficient communes of generalists) , it is just a daft choice in our world with our biology.
“A job is a context for performing a particular small set of tasks that can be exchanged for the means to obtain goods and services produced by a far larger set of tasks.”
Ummm. I get what you are trying to do, but you are indirectly tying value to labor or a “larger set of tasks.” This is not necessarily the case. Seems like you are backing into a labor theory of value, or at least a labor theory of value for labor. The point is that we are performing a specialized task of some type in exchange for value. The alternative of exchange is to do everything ourselves — to be generalists. Orders of magnitude more value can be created in an effective network via DOL&E ( division of labor and exchange) than by being a task generalist.
The actual value that we trade for may or may not involve a larger set of tasks. The key is that it is perceived as having greater value. Even if that value was found on the ground.
Your definition would be kind of correct if you were focusing on the efficiency of tasks, but you aren’t.
An alternative definition:
A job is a means of specializing in the creation of valued goods and services for others where we exchange the output of tasks we perform for something of higher value to ourselves.
Of course jobs shouldn’t just be created. Work, effort and energy expenditures are costs, not benefits. However, we can do work to create value for ourselves, or we can do work (a job) to create value for others in exchange for value to ourselves. In all cases the assumption is that with voluntary interactions value is created for both parties on every interaction (when we do work alone the assumption is that we are rational and not intentionally wasting our energy).
Arnold, you are consistently the best economics blogger working today.
Take out the ‘economics’ and I agree! 🙂
Well put, Andrew, and I agree for the most part.
Thinking along these lines, of course, helps illuminate several areas of political economy.
I think it was The Lion of the Blogosphere (though I can’t find the right post to link to) who suggested that social welfare programs are essential to the advanced division of labor, because without a “safety net” people would fear to specialize since job loss would mean rapid starvation. That is not a folk-Keynesian counter-cyclical spending argument for social insurance. It’s an argument based on individual concerns from which a pattern emerges: people want to specialize but they need insurance against their niche closing. They can’t easily buy such insurance because of transaction costs and the adverse-selection problem. Social-welfare schemes amount to government provision of job-specialization insurance. Though they attract free riders and become vehicles for vote-buying, they can still lubricate what would otherwise be a major friction in the economy, the much higher wages workers would demand to perform specialized jobs if losing them were nearly deadly rather than just demeaning. (Indeed, social insurance is the masses’ substitute for that farm which a rich man in the city always maintained in pre-industrial days so he would have somplace to retreat to if he should lose the monarch’s favor or see too few of his ships come back.)
Real individuals, unlike the protean abstractions found in some economic models, cannot easily change their own specializations (for example, a 40-year-old who trained and then worked as a bookkeeper cannot easily become, say, a diesel mechanic of equivalent skill when her bookkeeping job is computerized out of existence. Among other problems, she simply doesn’t have time to gain experience before she’s too old to work anyway). So real individuals do want someone to “create jobs” which those individuals can fill. They want to participate in an economy which values their individual human capital. That’s an important reason why people bemoan “the loss of manufacturing jobs to China” despite ivory-tower economists assuring them they should be happy to see the price of manufactured goods falling thanks to imports from China. The people who (effectively, though not by farsighted intent) specialized irreversibly in manufacturing work in their youth won’t gain overal utility from cheap imported goods if their disemployment leaves them too poor, even though people with non-tradeable jobs gain utility as they spend less on some goods (thanks to import substitution) and more on others (e.g., luxuries).
For reasons too complicated to rehearse here (though not actually obscure) people’s social status or dignity is entangled with their employment status (in our system). That too fuels demands for someone (typically “the government”) to “create jobs.” Even if social insurance pays enough to live on, it doesn’t pay enough to ensure recipients’ dignity. I suspect a social insurance scheme which pays both the lazy and the involuntarily-disemployed alike can never pay enough to fix the dignity problem. To obtain/maintain social status one must have a point of differentiation. In a society where most people can earn a living, people can “take pride” in various kinds of differentiation (one is rich, another is famously learned, or pious, or amusing…) but when the market pronounces one person “worthless” (in money terms, or ZMP) and another worthy, other points of differentiation fade in importance.
It might be useful to reorganize the American social insurance system to make overt what has been mostly obscured over the last quarter-century by “welfare reform” and the channeling of subsidies though “disability insurance” and “extended unemployment benefits.” We could offer “welfare” to the never-much-employed folks. We could offer “early retirement” to the structurally-disemployed folks above, say, age 40. The latter group could retain some dignity which society at large does not ascribe to the former (especially if payments were scaled to pre-disemployment income, as with current “social-security” retirement payments which vary somewhat with “contributions,” i.e., payroll taxes paid). Schemes to discourage free-riding are left as an exercise to the reader.
Great comment, Ghost.
I would just counter that affronts to one’s dignity may be seen both as part of the problem and part of the solution. The competition for status is a zero sum game with huge positive externalities ( when structured well).
A job is a way of creating value that someone else has thought up for you (an entrepreneur, or just an emergent set of practices). It is conventionally thought of as an employment relationship but some would consider a freelancer’s gig to be a job, too.