Ahhh, the last issue before the new year, the last issue before the Alternative goes underground and, to quote Van Morrison, gets some "heavy rest." I'm looking forward to it.

As befitting the holiday season, I got a gift today. I'm feeling about as lazy as a bear in winter and had been struggling with today's topic, as in coming up with one, when my inbox chimed with the following from one of you dear readers:

Hi Greg,

I really enjoyed your recent article "Leaking income and money." As before, when I read your article about the problem of roads in Bloomington and how simply increasing the number of lanes is not a solution, I find myself asking, "What IS the solution to the "Leaking income and money"?

You are gifted at identifying and detailing problems — might you also put some of that talent, insight into possible solutions and include these in your articles?

Best,
Jim

To which I replied:

James,

Thanks for your note, it's always great to get feedback.

Let me start: Your point about proffering solutions is a good one. But, frankly, I can't see the utility of advancing solutions until I can make my argument about the problem. Since my focus is on the contrarian/counterintuitive position I see my role, and responsibility, as one of presenting the opposite interpretation for consideration, not necessarily the solution. My experience has been that I usually get so much pushback in the first place that attempting to suggest an agenda for going forward is permanently premature.

I hope that makes sense.

In the case of income leakage, we are so inculcated with the "jobs, jobs, jobs" mantra and its corollary, that there is no such thing as negatively productive economic activity, that it's a full day's work just to get people to see that there just might be a locally meaningful economic difference between a $10 retail job selling shoes for a distant corporation vs. the exact same job selling the same shoes for a local firm. And it's another day's job getting people to understand that any economy is subject to limits in its ability to accommodate sector sizes.

The latter is to say that there is only so much retail activity that an economy can support. There is only so much "high technology" activity that an economy can support, there is only so much "life sciences" activity that an economy can support, there is only so much "transportation" activity that an economy can support.

There is such a thing, despite our governor's pronouncements to the contrary, as a zero-sum game. The transportation activity that he envisions for the new demi-beltway around Indianapolis won't be new activity, it will have to come at the expense of activity elsewhere.

There's no free lunch

When a WalMart (to name the favorite bogeyman) comes and "creates" 180 "new" retail jobs, it means 180 retail jobs were destroyed elsewhere in the community. The community won't buy twice as many sneakers, it won't buy twice as many hair dryers, it won't buy twice as many Sony Playstations just because there are suddenly twice as many places to buy them. And, if the jobs that are destroyed are retail jobs at firms with local shareholders (owners), then the profits from those jobs will leak/leave the community.

We will still have the same 180 jobs selling sneakers, but the 10% profit (or whatever) on selling those sneakers won't recirculate in the local economy. It will instead be pumped out. Same level of economic activity, but less wealth retained in the community.

That's simply not a concept that's easy for most politicians to accept, much less understand. It's also anathema to prevailing economic dogma that holds "trade" as inherently good and is unable to recognize when "trade" isn't trade, but is simply liquidation (hence my example of Nigerian oil and Monroe County limestone). It also doesn't help that the issue of income leakage is associated with 1960s-era liberal academic Marxist economic thought and tends to be summarily dismissed as a kind of barely-legal spring-break Keynesianism gone wild.

[For those of you unfamiliar, Keynes was the economist who helped Franklin Roosevelt get us out of the Depression. His theories have been largely supplanted in the modern world by those of Milton Friedman, the economist who helped Richard Nixon, Ronald Reagan and Bill Clinton destroy the American middle class. Both economists are widely lauded for their accomplishments.]

So the first job, before offering solutions, is to get adults to a cognitive place where they can understand that, despite how much they'd like there to be, there's no such thing as a free lunch. That economies allocate resources, they don't create them. That, just sometimes, a "new job" isn't really new, it's just a job that used to exist somewhere else and that a policy decision caused it to move — with a corresponding loser for each winner.

It's my hope that if I can get the people with the boots on the ground, mostly elected officials, to understand this basic, but uncomfortable and counter-intuitive, fact that the solutions will begin to suggest themselves.

That if people can understand (there I go with my liberal "education voice") that the things they hold as positive are, in fact, negative, that the solution will be obvious: stop doing those things.

Greg

Have a good holiday, I'll see you on the other side.

PS -- Thanks for the props, Jim.

Gregory Travis can be reached at greg@littlebear.com.