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Backwards Economics

Backwards Economics

    Regular economics involves someone starting a company and then hiring people to fill positions. That seems like a sensible model. But I wonder if the Internet gives us a way to flip that around, at least in times of high unemployment.

    Imagine a web site in which the unemployed, and underemployed, can register their skills and the sorts of jobs they would be willing to do. The site then suggests the sort of business that would fit in a particular community based on the available pool of labor.

    This is suboptimal, you say, and you are right.  Labor is only one of many factors in deciding where to start a business. So let me constrain the model further. Suppose the initial investor is the government, and the sorts of businesses are only the types that are good for the country: health, education, and energy.

    Yes, yes, the government screws up everything it touches. But imagine you can solve that by having each business run by qualified business people who have a profit motive. The government would be the funding source, set a few high level rules, and otherwise stay out of the mix.

    The reason I suggest government funding is that unlike a private investor, the government can make a huge return on a business that simply breaks even, assuming all of the employees pay income taxes. Plus you have the ripple effect on vendors to the company, and the benefit of reducing unemployment. In other words, where a private company might chase only low hanging fruit, the government can nibble from the top of the tree and still enjoy a sizeable return on investment.

    On the health side, we know that proper exercise lowers healthcare costs. Imagine the government setting up a virtual company in your community that involves the formerly unemployed acting as personal trainers and activity directors for the rest of the community. To simplify things, sometimes all you need is a soccer ball, some space, and a person willing to organize a game, and suddenly 22 people are having a great time and getting healthy too. Would they all pay five bucks per game? Probably. And one person could organize several games a day. If the government is involved, there are no insurance issues because a government can simply make it a law that you can’t sue it.

    If soccer isn’t your thing, substitute a running club, boot camp training, tai chi, basketball, biking, or whatever.

    For education, imagine all of the skills that the current unemployed possess and would be able to transfer, if only there were a company to organize them. There’s a huge demand for student tutoring. In my area, the kids who are struggling use tutors, and the kids who are doing well also use tutors to get an advantage for college. Tutors charge up to $40 per hour.

    Now extend the education model to adults. There is an almost unlimited demand for adult education, ranging from reading to language to public speaking to technology. In an era of high unemployment, there are plenty of people with the skills to teach almost anything.

    In the area of energy, the government could form businesses around photovoltaic installations. A benefit of this model is that it requires both blue collar and white collar workers. As long as there are roofs, the market is unlimited. And the government could make the product free to homeowners by fronting the cost and mandating that the local power companies pay off the systems over ten years, keeping some of the excess energy generated for profit. The government’s return would be huge because, again, they reap the income taxes from the people they employ right away, while recouping all of their investment in ten years.

    I’m just throwing out some ideas without thinking them through too carefully. That’s what I do in this blog. The main point is that the government could use the Internet to organize businesses around education, health, and energy, and make huge returns, thanks to income taxes, and improved health and education of the citizens.

    What I find most compelling about this notion is that the unemployed presumably imagine only a few types of jobs they could fill. But almost anyone who is employable in general could work in at least one of the job areas I just described, and none of it is digging ditches. As the economy improves, people can move on to careers that are more to their liking.

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