Economics @ ITT

Does government regulation really kill jobs?

Posted in economics, employment, macroeconomics, Policy Issues by ittecon on November 14, 2011

Not so much:

In 2010, 0.3 percent of the people who lost their jobs in layoffs were let go because of “government regulations/intervention.” By comparison, 25 percent were laid off because of a drop in business demand.

via Does government regulation really kill jobs? Economists say overall effect is minimal. – The Washington Post.

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5 Responses

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  1. Mr. Hall said, on February 26, 2012 at 9:07 am

    Of course people lose their jobs because of business downturns, but what is the cause of such cyclic conditions. Is it the governments policies and controls..

    In most markets, clearing occurs because price, supply and demand will regulate the marketplace. When government intervenes in what ever way it desires the market takes longer to clear and the cycles become both longer and more severe.

    • ittecon said, on February 29, 2012 at 8:22 am

      “In most markets, clearing occurs because price, supply and demand will regulate the marketplace” is a misstatement. In fact, this staement is ONLY true for perfectly comptetitive markets, of which there are none in existence. Moreover, Nobel laureat Joseph Stiglitz showed that any diversion from perfect competition makes any prices unpredictable due to mathematic chaos effects. So a slight discrepency in the market doesn’t just cause prices to be slightly off; they can be tremendously off. This is known in common vernacular as “butterfly effect.” The majority of markets are structured as monopolistic competition, oligopolies, or monopolies, all of which add frictions to the marketplace to distort the ability of market prices.

      • Mr. Hall said, on March 3, 2012 at 8:51 am

        Hey, Markets work better than governments. True there is speculation in the marketplace. To say “the majority of markets are structured as monopolistic competition, oligopolies, or monopolies” is a blanket statement. Prove the first premise before building assumptions. Make sure that you have correlation of cause and effect. Right now debt service on the American government is huge and it is sucking the life out of the American economy. Also the Nanny state that we the United States is building is intruding into all of American Society. This intrusion and government regulation is building an environment that is not conductive to business. The tax structure actually induces companies to move overseas. This Keynesian spend all and regulate all needs to stop or your and my descendants will not have a United States to talk about.

      • Mr. Hall said, on March 3, 2012 at 9:06 am

        Hey so nice of you to quote Joseph Stigiltz, is suppose that since you quote him you are saying the the job market which some might refer as the labor market note the subject of the article is not a competitive market. Stiglitz says no perfect markets are in existence. Okay but do market forces effect markets even if they are imperfect of course they do. Yes we don’t live in a vacuum that was the statement I was making. Government is not just intruding into the labor market but all parts of our lives and society. I do not welcome this intrusion. I firmly believe that the debt service and currently government spending is vastly too much. We are spending our futures in some Keynesian fantasy that government works better and does better than the marketplace. As government takes over the marketplace through regulation we lose our liberties. I think you can check out Milton Freidman for that idea. Markets bring liberty and not Math chaos. Too many politicians and economists running our lives will ruin our present and steal our children’s future.

  2. ittecon said, on March 3, 2012 at 1:00 pm

    Mr. Hall, That “Markets work better than governments” is a myth. A “perfect market” would work better than Government, but there is no such thing. I could argue that unicorns are faster than horses, but the statement is just as meaningless. A role of government is to adjust for inefficiencies in real-world markets.

    As for blanket statements, mine was not; let me clarify: There are 4 market structures: perfect competition, monopolostic competition, oligopoly, and monopoly. There are no perfectly competitive markets in existence (nor have there ever been), so the other three are all that remain, and are hence the majority in total.

    Keynesianism is about spending to increase Aggregate Demand during periods of recession. It has nothing to do with regulations in any shape or form. The problem is not Keynesianism in the least; the problem was the government spending that occured under the administrations when the country was *not* in a recession. This is not Keynesianism; this is just plain stupid.

    The United States has one of the most favourable effective corporate tax rates in the industrialised world. The meme that the US has a high tax burden is false.

    As for Stiglitz, there are no perfectly competitive markets—including labour. Market forces do affect imperfect markets, but what Stiglitz pointed out is the effects are *NOT* the same as those understood or taught in Economics, and so all bets are off given current economic theory.

    As for the rest, I am all too aware of Freidman (and Hayek and the Austrian school). These doctrines might work on paper, but not in reality. As a professional economist, my advice is that politicians should stop rambling on about economics because what they say is nearly always wrong and just confuses any real issues.

    Last note: On the topic of reading, I suggest “23 Things They Don’t Tell You about Capitalism” by Ha-Joon Chang, a professor at Oxford: http://www.amazon.com/Things-They-Dont-About-Capitalism/dp/1608191664.


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