Thursday, June 21, 2012

Destroying Markets To Create Jobs?

Felix Salmon offered his views on Why Bernanke’s not doing more following yesterday’s FOMC statement. Although there are several points with which I disagree, one quote in particular was striking:
Of all the things to worry about right now, price discovery and capital-allocation distortions are pretty low down the list. I’d happily do enormous damage to both of them if I thought it would do any good in terms of creating jobs.
While I don’t think Felix is alone in this sentiment, far from it, his comment is far more explicit than most others. A few questions immediately come to mind...

Does this view imply that damaging price discovery and capital-allocation does not kill jobs? Or, it only hurts future jobs, which are less valuable than current ones? Is there some ratio of current to future job trade-off that would make damaging those items worthwhile?

This view makes little sense given my understanding of economics, but clearly others have a different perception. If readers agree with Felix’s view, how would you answer the above questions?


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