If We Lose A Million Workers Then How Can We Manage The Economy?

We can't, obviously

One of the fun things about Anne Applebaum’s book on the Gulag is that she definitively nails whether free labour was, in fact, economic to use. This is one of those claims that Adam Smith made, that free labour was always going to be more productive than slave. But, productive and profitable are not wholly the same thing. Applebaum is able to show that the Gulag lost money for Russia. Not just freedom, lives, liberty and so on, but even employing millions in slave labour lost money.

Being able to calculate when this is so and when it’s not so is clearly difficult. The Soviets never did manage it despite their planning of the whole economy. They just came to a realisation, a gradual one, that it just wasn’t working.

The lesson from which? Calculating an economy is real, real, hard. Therefore management, in detail, by calculation, is real, real, real hard. Our demonstration today:

ONS labour market data ‘lost’ almost a million workers

Think tank says official figures undercount employment by 930,000 since the pandemic

A million is, in the context of about 30 million working in Britain, quite a lot:

Nearly one million UK workers are missing from official jobs figures because of major failures by Britain’s statistics agency that have made it harder for the Bank of England to control inflation, according to a leading think-tank.

The Resolution Foundation blamed “poor quality” and unreliable data published by the Office for National Statistics (ONS) for “misrepresenting” the jobs market and overstating Britain’s worklessness crisis.

Well, yes, Resolution Foundation. I trust their numbers about as much as the coins down the back of my sofa are household wealth. Technically true, in the sense that coins in the household are indeed wealth as it is also true that the numbers the RF issue are indeed numbers. But no more than that.

But let’s just run with this anyway. A million workers is about 3% of the entire workforce. And at the margins that people try to manage the economy that’s a rather large number. The difference between a 3% and a 6% unemployment rate would be considered large for example - which would, here, be the same thing.

It’s also true that the tolerances these people are trying to manage the economy to in terms of inflation, interest rates and so on would choke on a difference as large as that 1 million, that 3% of employment. Which is what the RF is complaining about, obviously.

But, Resolution - and lefties, economic managers, Keynesians and MMTers, all that lot - never do take the correct lesson from all of this. That truth being as Hayek said - the centre can never know enough to manage in detail. This is their very complaint here, no? That means that we cannot manage in detail. So, let’s stop trying.

Macroeconomic management doesn’t work because the data available to do detailed macroeconomic management is shit. Therefore let’s not try doing detailed macroeconomic management. Get the basics right, the incentives, markets, then leave be.

Of course, this then leaves a paucity of jobs for economists but then as I’m not one of them why would I give that proverbial?