3 February 2012
Arnold Kling writes in Wall Street Journal Europe on his report for the Adam Smith Institute: 'Patterns of Sustainable Specialization and Trade'. He argues against the Keynesian argument that government should create jobs to tackle unemployment and that we should look to the theories of Adam Smith and David Ricardo when understanding employment patterns.
Useful jobs don't exist until producers discover them. Stimulating demand can at best return an economy to the pre-slump status quo.
Persistently high unemployment is more severe in Europe and the United States today than at any time since the Great Depression. What is the solution?
Modern Keynesians claim the problem is that businesses and consumers are not doing their part. Borrowing and spending is a tough job, the Keynesians say, but somebody has to do it, and that somebody should be the government.
Unfortunately, this view may not be correct. Instead, I believe that the process of creating employment is explained not by the theories of Keynes, but rather by the theories of Adam Smith and David Ricardo. Smith famously described the advantages of specialization and division of labor. Ricardo pointed out the gains from trade that come from consuming goods that others produce more efficiently. From the perspective of Smith and Ricardo, real jobs emerge in the context of patterns of sustainable specialization and trade...
Read the full article in Wall Street Journal Europe here.
