Micro v. Macro

One of Boston's radio stations, WBOS, recently went to a DJ-free format. It is the second station in the market to do so (Mike 93.7 is the other). Both seem dedicated to "never two good songs in a row" but that's OK for me as I'm an NPR junkie.

The format move made me think, however, about job loss and the trend across industries to shed employees wherever possible. From a microeconomic perspective, each business wants to keep its costs as low as possible and employ no more workers than it needs to create the most profit. However, each business also needs enough employed customers to buy its products and services.

The problem, as I see it, is that we have largely abandoned macroeconomic policy as it relates to employment. Under both Republican and Democratic administrations of recent years, the only two policy tools that seemed to be available have been deregulation and tax cuts. The rationale seems to be to let "1,000 micro decisions bloom" in hopes that the wisdom of crowds will be an effective substitute for actual macroeconomic policy.

Now, neither deregulation nor tax cuts are necessarily bad but you can't play 18 holes well with only a 3 wood and a 5 iron. The recent subprime mortgage mess can be seen largely as an unintended consequence of deregulated financial markets. With no one at a macro level ensuring that the credit risks being taken were good, individual players were simply satisfied that they were good enough for them to take their little piece and pass them on the next player in the chain.

What does the subprime mortgage mess have to do with jobs policy? Look at the jobs that have been lost in the financial sector alone and the tens of thousands more that are being swept away in the riptide of that situation.

What, you may also ask, does this have to do with the format choices of radio stations? Simply that I posit that each job lost -- even a few djs -- create costs for society and that some of those costs should go back to the organizations that choose to replace people with technology. I don't advocate being so severe as to restrict innovation or create featherbedding, but I do think that we should have tax and other policies that reward job creation and penalize job elimination (unlike the current situation where there are significant tax benefits for investing in technology rather than people).

Microeconomic logic says to keep as few employees as possible; macroeconomic logic says that the closer we are to full employment we are, the better for all of us. I'm with the macroeconomists on this one.