Republicans And Econ 101 — Part 2

Posted by | November 10, 2011 09:59 | Filed under: Top Stories

by Stuart Shapiro

When I posted last night about how most candidates have trouble with simple economic concepts, I did not realize that Jim Cramer would be giving a test during the debate.  He asked the candidates whether corporations exist solely to create profits, not jobs.  The answers, well, were short of perfect:

ROMNEY: This is a wonderful philosophical debate. But you know what? We don’t have to decide between the two, because they go together.

CRAMER: Governor Perry, 30 seconds to you.

Do you think that companies can both be profitable and be able to create jobs? Do you think it’s a dichotomy? Do you think they can do it?

PERRY: There better be.

GINGRICH: Sure. Look, obviously, corporations can and should do both.

I’m with Milton Friedman on this one.  Corporations exist to maximize profits.  If that means jobs, fine.  If it means outsourcing jobs to China, fine.  If it means horrible working conditions, fine.  If it means replacing workers with robots, fine.  Corporations exist to maximize profits and expecting more of them leads to disappointment.  To deal with working conditions, wages that do not ensure poverty, and eliminating child labor, we need government and government enforces these things if society believes it is important.  Government also ensures that a safety net exists if profit maximizing corporations decide that they don’t need as many workers.
All the candidates would have lost a lot of points if this was really a test.  I do think Ron Paul would have nailed it.

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Copyright 2011 Liberaland
By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.

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