If you ever doubted that our politicians really know nothing about economics, you must watch this video from Rep. Jesse Jackson Jr (D-IL) who blasts Apple and Steve Jobs for killing American jobs with the iPad.
It’s simple: Because everyone can download books and newspapers, everyone who works at bookstores (he notes Borders going out of business) or the publishing industry, or for textbooks, will lose their jobs to the people making iPads in China.
Or if you prefer to hear it firsthand:
Sigh. The thing that frustrates me the most here is that arguments like this aren’t even examples of not knowing economics, they are examples of a lack of general reasoning ability. Let’s walk through the logic:
- The manufacturing of the iPad in China creates jobs for people in China rather than in the U.S. This is true, as far as I know. (+1 for Jackson)
- The existence of the iPad takes away jobs from people in bookstores and in publishing. Since the iPad is a substitute for hard-copy books to some degree, the existence of the iPad reduces the demand for books, which reduces the production books and therefore employment of those making and selling books. (+1 for Jackson)
- That said, what jobs actually go away? I mean, books still exist, they are just migrating to a different format. Therefore, it’s not like authors or publishers actually get laid off, and it stands to reason that the loss in employment is mainly limited to those physically producing the books and working in the bookstores. On that note, are books even manufactured in the U.S.? Inquiring minds want to know. (-0.5 for Jackson)
- When making any sort of normative argument, it is necessary to consider both the benefits and costs of an event. Jackson seems to have only focused on one of these sides and therefore comes to what is likely an incorrect conclusion. On the benefit side:
- U.S. employment goes up for those who are involved in selling the iPad. This includes all U.S. research and development people, designers, marketers, PR people, Apple store employees, etc. If the iPad causes all of the defunct Borders to become Apple stores, for example, it should be pretty clear that the iPad isn’t causing U.S. employment to go to hell in a handbasket (or a leather iPad case, for that matter). (-1 for Jackson)
- U.S. employment goes up for those citizens involved in making products that are complements to the iPad. (My personal favorite in this category is this keyboard case.) This is because the existence of the iPad increases demand for complementary products, and an increase in demand leads to an increase in production, sales support, etc. (-1 for Jackson)
- U.S. employment goes up in jobs where the existence of the iPad makes employees more productive. This happens for two reasons. First, increased productivity makes labor more cost-effective relative to capital, which encourages firms to grow by hiring labor rather than buying capital. Second, increased productivity lowers the cost of production, which encourages firms to produce and sell more. (-0.5 for Jackson, mainly because I don’t know how many people are actually using iPads to be more productive in their jobs)
- People get value from consuming the iPad- otherwise, why would people buy them? (I am not taking points away here since Jackson’s argument was specifically about employment and not value creation.)
Total score: -1. I find it hard to believe that the first point and a half outweigh all of the others, so I am reasonably certain that the iPad is not going to lead to mass U.S. unemployment…and I barely even had to use economics to come to that conclusion! The economics would have come in if I had had to show that even though the iPad reduces U.S. employment, benefits to consumers from having the iPad more than outweigh this loss.
I do think I understand where Jackson was trying to go with this argument, and it raises a relevant philosophical question: To what degree are people entitled to their current sources of employment? It’s pretty clear that technological progress and shifts in consumer tastes reduce employment in some industries and increase employment in others. It’s also pretty clear that it sucks when workers’ human capital (read, skills) becomes irrelevant, since people need to eat and have shelter and all of those fun things, and these things generally require employment. Personally, I do think that society should help these displaced workers to some degree, but I also think that this aid should be in the form of training and job placement rather than the retardation of technological progress.