Rich People Do Create Jobs: 10 Tweets — Confessions of a Supply-Side Liberal

This is my answer to a TED talk by Nick Hanauer, “Rich people don’t create jobs.” In the context of his TED talk, “rich people” means “entrepreneurs.” You can see my 10 tweets here, as well as by clicking on the title of this post. Let me explain a little background on a couple of these tweets.

It is when rich people consume that they use resources for themselves. If they save and invest their money, they are influencing how resources are deployed, but not using those resources up. If they give their money away, then the choice is in the hands of those they give the money to. If it is to their children, let’s hope their children also save and invest or give most of the money away so that they don’t use too many resources on themselves.
When I say that the efforts of entrepreneurs are complementary with those of other workers, I mean that extra effort by workers in a company produces more additional output the harder the entrepreneur is working to organize things.
In the short run, higher labor demand leads to more employment, but in the long run, higher labor demand leads mostly to higher wages, not to people working more. This is because, even if people are offered more jobs, there is a limit to how much they want to work. But almost all political rhetoric about labor demand is discussed in terms of “jobs."
One of my biggest themes on this blog is that despite the ways in which current policy is flailing around, that getting enough aggregate demand is not, in principle a hard problem. The hard thing is to foster the combination of more long-run growth and a fairer long-run distribution of the resources people actually use for themselves by consuming them.
Although having a large middle class providing a market for new goods probably is quite a good thing for technological progress, I think that trying to get a larger middle class by redistributing from the rich to the middle-class would backfire. That’s not the way to do it. What is a good way to bolster the middle class? How about breaking the public quasi-monopoly on education with vouchers and charter schools? Or failing that, how about doing what I propose in "Magic Ingredient 1: More K-12 School.” Also, let me repeat here my statement about rich, poor and middle-class, from my post “Rich, Poor and Middle Class”:

I am deeply concerned about the poor, because they are truly suffering, even with what safety net exists. Helping them is one of our highest ethical obligations. I am deeply concerned about the honest rich—not so much for themselves, though their welfare counts too—but because they provide goods and services that make our lives better, because they provide jobs, because they help ensure that we can get good returns for our retirement saving, and because we already depend on them so much for tax revenue. But for the middle-class, who count heavily because they make up the bulk of our society, I have a stern message. We are paying too high a price when we tax the middle class in order to give benefits to the middle-class—and taxing the rich to give benefits to the middle-class would only make things worse. The primary job of the government in relation to the middle-class has to be to help them help themselves, through education, through loans, through libertarian paternalism, and by stopping the dishonest rich from preying on the middle-class through deceit and chicanery.

6. Successful entrepreneurs create jobs in their own firms, but also typically destroy jobs in competing firms. That is part of how economic progress happens. We can block this competitive creation of new jobs and destruction of old jobs only at the cost of long-run stagnation. I doubt Nick Hanauer meant to argue for blocking progress in that way.

7. Outsourcing and offshoring also create jobs. People in other states or other countries getting jobs counts, too. They are human beings, just like us.