Wednesday, December 23, 2009

What to do about jobs in the US here and now

As millions of people suffer from unemployment, it amazes me how reluctant so many "experts" in the US are to think out of the box. People doing "creative" thinking about jobs in the US still mainly assume that $1 of government funds buys x jobs, if it's spending, and y jobs, if it's a tax cut, period. Why don't we have the sense to ask what KINDS of activities generate much higher x and y? In Japan, by contrast,

( people have carefully tabulated the initial economic stimulus (prior to multiplier effects) versus government expenditure by type of activity. The "three pillars of eco-friendly..." activity was well designed to generate three times the stimulus as ordinary government spending or tax breaks for the same deficit effect. The multiplier effects would also be better than they are for "cash for caulkers" and the like, because the stimulus is all focused on sectors (automobile, construction, steel) where spending generates employment rather than inflation or imports, much more than random spending would achieve. If we really cared about jobs here and now, we would put almost all our new jobs effort into our own version of the "three pillars program" -- perhaps paid for by a gasoline tax, whose effect on US jobs would be far less. One pillar should be: $3000 per car "cash for independence" , for buyers of qualified cars to stay in effect until quarterly data show US car sales back above the rate of 13 million per year; a "qualified car" should be defined as qualified for a credit under section 30B of the IRS code as amended by the proposal at

It's important to note that mpg as such is not the best measure of PROGRESS towards the goal of OECD becoming independent of OPEC. In technical terms, a "U" function is not a "J" function; as another example of this principle, the rational market price of oil is not just the marginal cost, because there is a "Hotelling rent" term reflecting the reality that the oil market is not a static system. Like the Japanese, we would also be wise to fund the two other pillars (incentives to encourage purchase of eco-friendly new buildings and appliances).

But -- this is not an endorsement of other aspects of the Japan stimulus package.


Further details: the distinction between U and J is very fundamental in dynamic systems theory, in "ADP" and

in the field of intelligent systems. For some tutorials and citations, see

Perhaps I will someday post the Japanese web site as amended to include some English translation,


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