Milton Friedman once visited a developing country where they were building a canal. He remarked to his host how surprised he was that the workers only had shovels. For a large excavation project, heavy earth-moving equipment would be typical.
“You don’t understand,” his host noted. “This is a jobs program.”
“If it’s a jobs program,” Dr. Freidman replied, “why don’t they use spoons?”
The illogic of being deliberately inefficient is clear when it’s as egregious as digging a canal with a shovel. The wasted time, manpower, and money could be better used elsewhere. The entire society is impoverished when resources are wasted.
We have all sorts of “jobs” programs here in the U.S. In New Jersey gas sold on the Turnpike has to be pumped by attendants. In Illinois all cash-payment toll booths are staffed. They don’t use automated machines. Across the country inefficient processes produce protected jobs and economic waste.
What we have is an issue of the seen and unseen. We can see the jobs inefficiency creates, but we can’t see the hidden costs: wasted time, wasted labor, and wasted money.
If our fiscal crisis forces us to do away with make-work inefficiency, it may be an ill wind that blows some good.
Douglas R. Tengdin, CFA
Chief Investment Officer
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