DRI-131 for week of 8-16-15: Hillary on CEO Short-Termism: Three Views

An Access Advertising EconBrief:

Is the Purpose of Government to Eliminate All Sources of Discontent?

If we took every action taken by government at face value, we would be forced to conclude that its central purpose is to eliminate all sources of discontent. And that is exactly the goal set for it by a long-forgotten Labor Party parliamentarian in early 20th-century Great Britain. Is that really what motivates politicians and bureaucrats? Should it be?

Actions taken by state-government regulators in New York raise these questions. Earlier this month, state Attorney General Eric Schneiderman announced that retailer Abercrombie and Fitch was the most prominent of 13 companies to end a work practice known as “on-call scheduling.” The Attorney General (hereinafter, AG) cited pressure by his office as the motivating force behind the change. The practice requires workers to be “on-call” for work in the sense that they must be prepared to show up or stay home on very short notice of as little as one hour. As noted in The Wall Street Journal (“Abercrombie Agrees to End On-Call Scheduling,” 8/7/2015, by Lauren Weber), “workers whose shifts are canceled don’t receive pay, even if they had blocked out that time and made child-care  or other arrangements.”

Abercrombie’s general counsel, Robert Bostrom, described the company’s capitulation by stating that workers will henceforth receive their schedules one week in advance and can choose to receive word about additional shifts that become available on short notice. The new policy, intended to “create as stable and predictable a work environment as possible” for Abercrombie’s employees, will become effective in September in New York and eventually be phased in nationwide.

Why did the Attorney General of New York state choose to intervene in the work-scheduling policies of a baker’s dozen retailers? “Unpredictable work schedules take a toll on all employees, especially those in low wage sectors,” commented Schneiderman, adding that other companies should follow Abercrombie’s “important step.” In April, the AG had claimed that Abercrombie’s policy “potentially” broke a New York law. That law states that staffers who report for scheduled work must receive at least four hours’ pay at minimum wage even if sent home. (Several other states have similar laws.) As the Journal points out, the law was passed before the advent of text messaging and e-mail made it easy to reach most people on short notice. Despite its change of policy, Abercrombie admitted no violation of law.

To an economist, the regulatory action taken by the New York Attorney General’s office and the explanations accompanying it seem utterly inexplicable – unless we are willing to believe that the inherent purpose of government is to eliminate all sources of human discontent.

Why Oppose – That Is, Regulate – On-Call Scheduling?

AG Schneiderman has chosen to regulate on-call scheduling by issuing an unfavorable opinion of this particular work practice, then pressuring firms behind the scenes to drop it. The question is: Why?

According to the Journal, “a number of current and former Abercrombie store associates nationwide left complaints about the scheduling policy on the employer-review site “Glassdoor….” (Parenthetically, we should note that the ghastly use of “a number of” could denote anything from one to infinity and is the kind of elementary error that freshman journalism students are taught to avoid.) Let us stipulate that some workers find the practice of on-call scheduling objectionable. So what? Is the purpose of government to act as a sort of all-purpose complaint department? Or is there something unique, perhaps, about the situation of retail employees – or human labor in general – that requires complaints to be addressed by government rather than directed to management?

As a matter of fact, why don’t workers who find the practice of on-call scheduling objectionable adopt the great American solution open to all workers in a free society; namely, quit and find a different job with working conditions more to their liking?

The Great Fried-Chicken Dilemma

To clarify this problem, consider a much easier problem posed in a much more familiar context.

Consider the problem of consumers confronted with a product they don’t like. Suppose a diner visits a fried chicken restaurant and finds the main course unpalatable. Should the diner complain to management? Well, many restaurants encourage this; it may or may not produce a refund for the diner. Conceivably, it might even result in alteration of the restaurant’s recipe or staff. But chances are that the diner will simply shrug and go somewhere else. After all, there are untold numbers of competing fried-chicken restaurants.

Should we demand that the Federal Trade Commission monitor consumer websites for customer complaints and “crack down” on restaurants that sell “inferior” fried chicken? No, there are huge flaws with this approach to the problem of maintaining restaurant quality. One drawback is that consumer tastes in fried chicken differ; one man’s inferior chicken is another man’s delight. Requiring government to enforce a quality standard in fried chicken will inevitably result in the production of “government quality” fried chicken; that is, one kind of fried chicken that diners of all tastes will have to eat or else. In this case, “or else” means they will have to prepare their own fried chicken. Since they previously had that alternative but rejected it in favor of dining out, this clearly makes them worse off than they would be if they could find a fried chicken to their taste. Of course, we could pretend to solve this problem by having government set up a different quality standard for each different flavor of fried chicken – one for extra crispy, one for spicy, and so on. But this would only create a host of new problems. And it assumes that government is just as responsive to consumer desires as producers are in free markets, whereas our experience tells us that government is quite insensitive to the desires of constituents and tends to impose a “one-size-fits-all” standard on the public whenever it can.

Another obvious drawback is the vast number of fried-chicken restaurants and diners, which would force government to employ huge numbers of people and spend ungodly amounts of time checking out complaints. (Lack of resources also argues against having government set up multiple quality standards for fried chicken, since it would hardly have sufficient time and manpower to enforce one standard, let alone multiple ones.)

Still another drawback would be the inducement sellers would have to file complaints against their competitors. Not only would this tie up government resources in investigating bogus complaints, it would also imperil the workings of competitive markets. If sellers could use government as a tool in falsely branding their competitors’ products as inferior, this would vitiate the very purpose that regulation is intended to serve.

Just think about all the problems we don’t have because we don’t force government to regulate fried-chicken quality in free markets. We don’t have to worry about how many different flavors of fried chicken to allow – are regular, extra-crispy, spicy, and Cajun-style enough, too many or insufficient to satisfy us? Should the number vary in different cities? Counties? States? Regions? Should it change over time, and if so how often? We don’t worry about any of these things. In fact, we take the answers to these questions completely for granted without ever realizing that they might be a problem in the first place. The market takes care of the answers without any of us ever giving the matter a moment’s thought.

Upon consideration, we realize that the mere fact that somebody doesn’t like fried chicken at a restaurant doesn’t necessarily mean that a market failure calling for government regulation has occurred. It might simply mean that the consumer has tasted fried chicken prepared in one of the various ways that don’t suit him; he needs to visit a restaurant better suited to his tastes. Of course, this could be styled a failure of information, but it is certainly not clear that government regulation could have prevented it or could solve it for other consumers. Markets, not governments, are collators and transmitters of information.

If we tried hard enough, we might envision a role for government in such a situation. Maybe the consumer didn’t like the chicken because it was tainted by salmonella. But we have government regulation of health standards in restaurants and preparation standards in chicken plants – and salmonella cases still happen. In reality, markets solve the problem of food poisoning in restaurants by turning restaurants that serve tainted food into commercial pariahs – a disincentive that exceeds any penalty government offers.

The Great Fried-Chicken Dilemma offers vast insight into the problems of labor markets in general and the regulation of on-call scheduling in particular.

The Potential Efficiency Benefits of On-Call Scheduling

Neither Wall Street Journal article nor Attorney General Schneiderman – nor, for that matter, Abercrombie itself – said anything to suggest that the practice of on-call scheduling might actually be beneficial for retail sellers, for consumers and for workers themselves. That omission is startling. There was a reason why Abercrombie and 12 other retail businesses employed this business practice.

Every consumer has patronized a retail seller and knows that these businesses are sometimes bustling with business and sometimes nearly empty. At some point, every consumer has experienced the frustration of seeking a sales clerk in vain. Businesses strive to keep exactly the right number of staff on the floor – not too many, not too few. Depending on the particular good(s) sold, human labor may be the most expensive cost incurred by the business, so it behooves managers to manipulate their “inventory” of sales staff to best advantage.

Just as businesses want to manage their inventory of sales staff optimally, so they also want to keep just the right amount inventory of goods on their shelves. For centuries, this was one of the biggest headaches facing the average business. Economists even identified the phenomenon called an “inventory recession,” caused by too many businesses simultaneously overestimating the need for future inventories and producing far more goods than were needed – only to find shelves and warehouses full to overflowing when consumer demand did not keep pace with expectations. Recent technological innovations in transportation, logistics and computers have allowed business to employ an inventory scheduling practice called “just in time” inventory management. This allowed businesses to postpone restocking until the last minute, letting them gauge demand much more accurately and avoiding the necessity for accurate long-distance forecasting of inventory needs.

If we view a retail business’s roster of employees as its staffing “inventory,” it is clear that on-call scheduling is a kind of “just-in-time” program for staffing. It allows retail managers to postpone determination of their final staffing schedule until the point when they can gauge the demand for retail staffing much more accurately. This allows them to avoid paying superfluous clerks when the store is virtually empty while having extra clerks on hand when demand is unexpectedly strong. It is crystal clear that on-call scheduling is potentially very beneficial for a retail business.

Moreover, it should be equally clear that on-call scheduling benefits consumers, too. This is a case where the interests of consumers and those of the business are directly aligned. Consumers want to have extra clerks on hand at busy times but don’t benefit much, if at all, from the presence of superfluous clerks in slack times. In the long run, competition between retail businesses will insure that the benefits of lower costs are passed along to consumers in the form of lower prices, so the efficiency gains from on-call scheduling really go to consumers, even though we associate the concept of business efficiency with productive advantage and gains to business owners.

What obviously failed to occur to AG Schneiderman, the Wall Street Journal and (from outward appearances) even Abercrombie and its spokesman is that on-call scheduling is also a potential source of benefits to retail employees. Just as consumers in our fried-chicken example derive benefits from product differentiation, so also may workers derive benefits from different terms of employment and work environments. Retail sales work is generally viewed as a form of low-skilled labor. Economists treat low-skilled labor as homogeneous; that is, as indistinguishable. But on-call scheduling allows workers the chance either to accept employment or, alternatively, earn a higher wage by competing on the basis of willingness to work – or forego work – on short notice. Since the decision to work for a particular employer is voluntary, nobody is forced to take this offer – just as no consumer is forced to eat fried chicken they don’t like. There are countless retail sellers, so workers who don’t relish the practice of on-call scheduling can work for a business that doesn’t follow the practice – just as consumers who don’t like one variety of fried chicken can patronize one of the many other competing brands extant.

So Why Regulate On-Call Scheduling?

On-call scheduling offers potential benefits to retail businesses, consumers and even to retail workers – just as different types of products offer potential benefits to consumers. Nobody is forced to endure on-call scheduling if they don’t like it, since the large number of retail businesses competing for workers gives workers a wide choice of employment – just as consumers have wide choices of different products and aren’t forced to put up with a particular brand. If it would be incredibly wasteful and a huge mistake to regulate brand variety and quality of consumer goods – and it would – wouldn’t it be just as big a mistake to regulate the practice of on-call scheduling for analogous reasons?

The answer is yes. There is no earthly reason for government at any level – municipal, state or federal – to regulate the practice of on-call scheduling. Only bad can come of it. The implication of AG Schneiderman’s actions is that government has a duty to prevent human beings within its jurisdiction from experiencing even momentary discontent. The AG must consider workers to be either too stupid to act in their own interest or too helpless to do so even if they had the wit to perceive it. Left unspecified, however, is how or where the AG acquired the superior wisdom and knowledge to substitute his judgment for those of the workers whose interests he claims to represent.

Free Markets vs. Regulation

We have shown that various ways of producing goods and services (such as utilizing on-call scheduling to staff retailing establishments) and various types of goods (such as different varieties and flavors of fried chicken) offer potential benefits to consumers. How is that potential actuated; that is, how do we cross the bridge from “potential” to “actual?”

Apparently, there are two ways. We can give the processes and products a trial in the free market and see how they work, keeping the ones that succeed and discarding the ones that fail. The failures will lose money for sellers because consumers will reject them, either because they do not like them or because they are too expensive. That makes it easy for producers to discard them. Alternatively, regulators can accept or reject them on an a priori basis. In order for this method to succeed, regulators must know as much about technology and costs as the producers of the affected goods and services do. Regulators also must know as much about consumers’ tastes and preferences as the consumers themselves do – as well as knowing what is “good” for consumers to consume in a physiological and moral sense. In other words, regulators must be well-nigh omniscient. (Where input markets are directly affected, as in this case, we can treat workers as the “consumers” of the relevant process.)

Put in this way, the choice is as clear as two-way glass. Free markets work vastly better and are less expensive than regulation. Given this, why do governments leap to regulate at every opportunity?

Why Governments Almost Always Choose Regulation

The New York State Attorney General chose to regulate on-call scheduling for a reason. Based on our analysis, we might suppose him to be perverse – deliberately choosing a result that makes everybody worse off than before. But that is not so. Economics tells us that somebody has to be better off, and the first place to look for the beneficiary or beneficiaries would be the AG himself and his sponsors and constituents.

The AG is a bureaucrat, a denizen of state government. He benefits when his domain grows larger and his power over it increases. When the number of firms he regulates increases, the AG’s power increases and his budget increases or, more properly, his basis for demanding a budget and staffing increase strengthens. When the AG’s office regulates the processes employed by retail firms, preventing them from using innovative means to compete with other firms, state government is cartelizing what would otherwise be a competitive market. The result of this will be less output and higher prices in the retail-sales sector. This creates a constituency of business owners and managers who are beholden to the AG and state-government politicians. (In the broad sense, this is what happened for over four decades when the old Civil Aeronautics Board cartelized interstate airline travel in the United States between the 1930s and 1978.)

Notice that the list of beneficiaries from regulation of on-call scheduling is small compared to the roster of potential beneficiaries from unregulated on-call scheduling. Regulation benefits government bureaucrats, workers and politicians directed involved with the affected industry, along with business owners who gain from market cartelization. It harms everybody else, most notably the consumers of the good involved and (in this case) almost certainly the workers affected as well. The gains of business owners are probably temporary, but the gains accruing to government will last as long as government regulation continues.

The best way to visualize the actions of government vis a vis markets is by thinking of government as entrepreneurship in reverse. Politicians and bureaucrats are always alert for opportunities to expand their domain. But whereas the invisible hand of competition and voluntary exchange insures that free-market entrepreneurship creates broad, mutual benefits, the coercive, visible hand of government subtracts net value from almost all of its interchanges with markets.

Is the Purpose of Government to Eliminate All Sources of Discontent?

Now we understand the heretofore inexplicable contention that the purpose of government is to eliminate all sources of discontent. How could anybody be so naïve as to think that government has the ability to remedy all unhappiness? Doesn’t the speaker realize that his statement is a recipe for fiscal insolvency? Writing a blank check to government is a fruitless quest for a non-existent nirvana.

Alas, the author of those words didn’t particularly care whether government actually succeeded in eliminating any discontent or not. He was not striving for universal bliss. Rather he sought an unlimited warrant for government intrusion in order to benefit his own special interest. The more power government has, the larger it grows. The larger it grows, the more its servants prosper. And the more the servants of government prosper, the more the rest of us suffer.

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DRI-270 for week of 2-9-14: Can We Make Economic Sense of First Wives’ ‘Joining Forces’ Initiative?

An Access Advertising EconBrief:

Can We Make Economic Sense of First Wives’ ‘Joining Forces’ Initiative?

In 2011, the wives of President Obama and Vice-President Biden, Michelle Obama and Dr. Jill Biden, announced formation of a public-service initiative called “Joining Forces.” The action is ostensibly intended to “honor and support our veterans, troops and military families.” What sort of “honor” and “support” is provided? A fair idea can be gleaned from the op-ed appearing under Ms. Obama’s byline in the Monday, February 10, 2014,

Wall Street Journal. It is entitled “Construction Companies Step Up to Hire Veterans.”

It contains the sort of prose that adult Americans have been bombarded with since birth. Still, inquiring economists want to know: What sense can we make of this sort of appeal?

Why Should Construction Companies Hire Veterans?

Ms. Obama uses the lead paragraph of her op-ed to announce an announcement. On publication day, “more than 100 construction companies – many of whom are direct competitors – are coming together to announce that they plan to hire more than 100,000 veterans within the next five years. They made this commitment not just because it’s the patriotic thing to do, and not just because they want to repay our veterans for their service to our country, but because these companies know that it’s the smart thing to do for their businesses.”

“As one construction-industry executive put it, ‘Veterans are invaluable to the construction industry. Men and women who serve in the military often have the traits that are so critical to our success: agility, discipline, integrity and the drive to get the job done right.” Ms. Obama records her approval of this “sentiment” and reiterates the guiding challenge of Joining Forces: “Hire as many of these American heroes as you can.”

Joining Forces originated in 2011. “Since then,” Ms. Obama reports, “we have been overwhelmed by the response… The CEOs we have spoken to have been consistently impressed with their hires…veterans are some of the highest-skilled, hardest-working employees they’ve ever had… resilient, adept at building and leading teams, comfortable with diversity, and able to handle uncertainty.” This is attributable to veterans’ “training and experience,” including “some of the most advanced information, medical and communications technologies in the world.” To bolster her argument, she offers an anecdotal case of an Air Force manpower specialist whose service job was estimating the troop strength and specialties needed for missions. Like many veterans whose “qualifications aren’t always obvious from their resumes,” he would have been “easy to overlook” if not for the Disney Company’s human-resources specialists, who are “trained…to translate military experience into civilian qualifications.” They realized that his military background ideally qualified him to plan meals by specifying exact kinds and quantities of ingredients.

Ms. Obama earnestly implores us to consider the multitude of possible employment conversions. Military medics would make such good paramedics and EMTs. Tank crew members would make dandy truck drivers. The military employs “engineers, welders [and] technicians.” Small wonder, then, that “American businesses have hired nearly 400,000 veterans and military spouses” since Joining Forces opened up.

Why Do Construction Company Managers – or Employers

Generally – Need Advice on Whom to Hire?

The first question that occurs to the inquiring economist is: Why do construction company managers need advice on whom to hire? Indeed, why would any employer need that sort of advice?

Running a business can get complicated. But few decisions are as fundamental as qualifications for new hires. If owners and managers don’t know what they’re looking for in a job applicant, how can they ever hope to succeed?

It is true that we recently underwent a financial crisis, the trigger of which was a housing bubble. Undoubtedly many unwise decisions were made in housing sale and finance, and quite a few in housing construction. But nobody has suggested that the crisis was caused by construction companies hiring the wrong people.

In her op-ed, Ms. Obama didn’t actually

say that employers are boobs who are incapable of hiring the right candidates without the help of the federal government – more specifically, without the help of the wives of the President and Vice-President of the U.S. (Of course, her actions tacitly encourage this belief on the political Left, where it has always flourished.) In fact, what she actually said was that “CEOs …have been consistently impressed with their hires.” She even quoted “one construction industry executive” to the effect that “veterans are invaluable to the construction industry. Men and women who serve in the military often have the traits that are so critical to our success.” (The executive cannot be speaking from experience gained from working with Joining Forces, since that partnership is only now being announced.) If construction-industry executives

already knew

that veterans are “invaluable” – a plausible conjecture for reasons adduced above – why was the intervention of Joining Forces needed?

The clincher comes from Ms. Obama herself, referring to the commitment made by the consortium of construction companies. “They made this commitment not just because it’s the patriotic thing to do…but because these companies know that it’s the smart thing to do for their businesses.” If they

already knew that it was in their interest, in

advance

of this agreement, why was jawboning by Joining Forces required?

In her op-ed, Ms. Obama offers no hint as to why the employers she is urging need advice on hiring. She actually vitiates her own argument by providing persuasive evidence that they do

not

need her gratuitous advice.

If Employers Did Need Advice on Hiring, Why Would They Seek it from the First Wives?

When people need advice, they generally seek out experts. The hiring decisions of business owners and managers affect their livelihoods and the wealth of investors – all the more reason to obtain qualified opinions when in doubt. Why would a manager base hiring decisions on advice offered informally by two people whose fame and expertise lie outside the industry – and who have no experience in management or personnel?

Taking the advice of a lawyer and an English professor on hiring because their husbands happen to be the President and Vice-President would be tantamount to acting on the basis of a celebrity endorsement. We might heed a celebrity endorser on a question of taste – a choice of beer, say, or candy bar – but not on a matter demanding specialized or expert knowledge.

In her op-ed, Ms. Obama makes one reference to “current research,” but cites no original research attributable to her, Ms. Biden or Joining Forces. In other words, her initiative adds nothing not already available to employers, who already have the strongest possible incentive to seek out and act upon pertinent information about employment candidates.

It is clear that the First Wives would ordinarily not be people whom executives, managers and business owners would solicit for advice on hiring.

Is Ms. Obama Asking for Charity, Demanding an Entitlement or Offering Advice on Efficient Hiring?

Ms. Obama’s plea for hiring of veterans is a mixture of mutually exclusive messages. In the opening paragraph of her op-ed, she declares that construction companies made the commitment to hire over 100,000 veterans in the next five years “because it’s the patriotic thing to do…because they want to repay our veterans for their service to our country [and] because it’s the smart thing to do for their businesses.” Each of these motives is distinct from, and inconsistent with, the others.

In a free-market economy, the purpose of business is to produce as many goods and services as efficiently as possible. This requires hiring workers solely on the basis of their productivity. While business owners are not barred from having ulterior motives and acting upon them, they will suffer a penalty for indulging any prejudices or whims not consonant with the goal of maximum efficiency and profit. And when businesses depart from the straight and narrow, consumers suffer as well.

If the veteran is indeed the best employee for the job, everybody – the veteran, the company and consumers – wins if the vet is hired. But in that case, the intercession of Ms. Obama, Dr. Biden and Joining Forces is utterly superfluous. If the vet is not the best candidate, then the efforts of some outside agency might well be decisive. But that is hardly a victory for truth, justice and the American way. How is patriotism served by making the company and consumers worse off? For that matter, what is patriotic about sticking a veteran in a job in which he or she is inferior to somebody else?

The notion of “repay[ing] our veterans for their service to their country” is at best an anachronism, a throwback to the days before the all-volunteer military. The draft was viewed – erroneously – as a means of assembling a fighting force without having to pay the full economic costs that would be demanded by willing workers. In that context, it might have made a semblance of sense to provide extra compensation to surviving soldiers after demobilization. But today’s fighting force is composed of volunteers. They are professionals who are paid for their work and equipped with physical, mental and emotional skills that pay dividends after their service ends. It is patronizing and insulting as well as flagrantly inaccurate to treat them as naïve conscripts who need looking after. They are not “our boys.” They are men – and women. Apart from medical treatment for injuries suffered on duty, the only further payment they require is respect.

Why is it Desirable for Construction Companies to Collude in Hiring Veterans?

Ms. Obama went to great pains to announce that over 100 construction companies were “coming together” to “plan” their hiring of veterans. To alleviate potential ambiguity on the point, she noted that “many of [them] are direct competitors.” The term economists and lawyers use to characterize collective hiring decisions made by direct competitors is “collusion.” It is presumptively illegal, on the theory that it allows firms to set wages lower than would be the case were the companies to compete independently in the same labor market. Collusion allows the firms to replicate, or at least approach, the outcome attained by a single

monopsony buyer of labor – just as collusion by a cartel of sellers in a market for output strives to replicate the

monopoly

result attained by a single seller.

When owners of major-league baseball teams were adjudged guilty of collusion in bargaining with players, they were subject to legal penalties. Why is it wrong for baseball-team owners to collude in hiring players but praiseworthy for construction companies to collude in hiring veterans? Does the approval of Madams Obama and Biden sanctify the practice?

It seems axiomatic that when two people whose primary basis for association is political cooperate to achieve an outcome, their motives are presumed to be political. A political motivation does not sanctify collusion – just the opposite, in fact. A political motivation suggests that the collusion will benefit one political interest or party at the expense of the other or others. Moreover, it also suggests that the gains of the gainers will be less than the losses felt by the losers. That is one way of defining the difference between economic change and political change.

Will Madams Obama and Biden personally supervise the hiring to prevent the monopsony outcome described above? Ms. Obama made no mention of it. There is no reason to expect that, since we have no reason to think that either Ms Obama or Ms. Biden have advanced training in economic theory and no reason to think they could effectively supervise the hiring of thousands of people even if they did. It is competition that precludes the possibility of monopoly, not minute scrutiny of each economic transaction by government authorities.

How Do We Explain the History of Joining Forces?

We have cast overwhelming doubt on the public rationale behind Joining Forces, the initiative promoted by the First Wives. What, then, is its likely purpose? The late Milton Friedman likened the actions of politicians to those of the lead duck in a flying V-formation. Periodically, the leader glances back, only to discover that the formation has deserted him and is flying off in a different direction. The leader must scramble to find the formation and resume his place at the head. The point is that this form of leadership is purely ceremonial; the formation leads and the apparent leader is really following.

It was clear even in 2011 that the Obama administration’s economic stimulus package had failed to stimulate. The Federal Reserve had embarked on an unprecedented program of monetary expansion that was being sold as stimulus but was really designed to prop up the financial system. The Obama administration needed something it could point to as a success and claim credit for.

Presidential spouses since Mamie Eisenhower have been publicly active. Mostly their activities have been innocuous; i.e., non-political. The most conspicuous exception was Hillary Clinton’s leadership of her husband’s health-care program – a choice that turned out to be notably unsuccessful. This time, Mrs. Obama’s involvement was shrewdly chosen.

Politically, her support for veterans was designed to appeal to both friend and foe. It would satisfy Democrats who had become accustomed to a party line of supporting soldiers but not war and whose nostrils quivered at the scent of a victimized interest group. The President

was thought to be particularly unpopular with the military community and pro-military Republicans, so Ms. Obama’s stand couldn’t help but improve matters there.

Economically, Ms. Obama would be betting on a sure thing. The President’s wind-down of wars in Iraq and Afghanistan, coupled with Defense Department budget cuts, would gradually feed veterans into the civilian work force. Mrs. Obama’s strategy would portray them as if they were draftees coping with a painful readjustment amidst civilian indifference or even hostility,

a la the World War II vets in the movie

The Best Years of Our Life or the Vietnam vets of

Coming Home

.

Of course, nothing could be further from the truth than this pretense. The volunteer military has been working well for decades. In order to attract recruits, the military has had to offer not only wages and salaries sufficient to compensate soldiers for the opportunity costs of service, but also training in the skills and technological savvy necessary to run a modern military. To employers starved for job applicants with just those skills and training and the emotional maturity gained from military service, skilled vets are like raw meat to hungry lions. And even unskilled vets offer physically trained bodies coupled with mental self-discipline – two more attributes that are highly attractive to sectors like the construction industry.

What about the publicity given to returning vets suffering from forms of emotional trauma such as delayed stress? Could this have given rise to a bias adversely affecting the employment prospects of all returning veterans? Could Joining Forces play a role in overcoming this bias?

We will never know because Ms. Obama’s op-ed says nothing on the subject. We cannot very well grant Joining Forces the credit for overcoming a bias that may or may not exist and that the initiative has ignored. It is easy to understand why the First Wives might skirt the issue. They have no expertise in this area either and do not want to introduce an issue that can only detract from their otherwise favorable publicity.

So what role have the First Wives and Joining Forces played in the absorption of vets into the civilian work force? None whatsoever. They are the leader ducks scrambling to get in front of the formation. They are desperate to take credit for veterans’ inevitable success. No wonder, since this has been the only bona-fide economic success that the Obama administration has rubbed up against in recent years.

Why Has Business Cooperated in this Sham Initiative?

Ms. Obama’s op-ed makes it clear that businesses throughout the country have cooperated with the First Wives in professing solidarity with their initiative and making sympathetic noises toward veterans in general.

Our analysis shows that Joining Forces is a sham. Its motives are purely political. In economic terms, it is superfluous. The internal logic behind the project is so contradictory that the more contemplation it receives, the more ludicrous is becomes.

Why, then, have businesses been so cooperative with the First Wives? The obvious answers would seem to be: fear and prudence. Businesses have watched the conduct of the Obama administration. They have seen auto-company shareholders expropriated for the benefit of unionized employees. They have seen one regulatory agency after another launch assaults on industries in the form of new rules, regulations and policies. They have observed an entire Presidential campaign built around attacks on business success and a candidate who epitomized it. They saw the President’s approval rating remain consistently high throughout, suggesting that his actions resonated with a majority of the general public – not just the proverbial 47% that are supposedly dependent on government. Thus, they have every reason to fear the wrath of this administration and to avoid displeasing it if possible.

In this case, business leaders almost certainly reason that playing along with the sham of Joining Forces is a form of cheap insurance. They can make effusive public statements supporting the goals of the First Wives – talk is the cheapest form of political payoff. And they don’t even have to lie – at least not much. They can sign declarations of support and even make public “plans,” “announcements” and “commitments” – none of which contractually obligate them to anything and which the public will have forgotten about within days. The Obama administration has no intention of later holding their feet to the fire and checking to see if they follow through on that “commitment” to hire 100,000 veterans. (Follow-through would have everything to lose and nothing to gain, since the administration only cares about

seeming to cause veterans to be hired, not about actually

doing

it.) Businesses will certainly hire veterans, who constitute an attractive employment option. No economic archaeologist is going to later paw through the data to calculate whether veteran hires reached the promised total. As political blackmail goes, this is probably the cheapest form of protection these businesses will ever pay.

What’s the Harm?

Readers might wonder where the harm lies in allowing the First Wives their little deception. They aren’t altering the course of economic activity much by their actions. Perhaps this forestalls them from pursuing some more destructive pastime.

Willful deception practiced by government cannot be beneficial. Its effects will harm us both directly and indirectly. Waste and misdirection of resources are bad enough. But the misleading impression of an omniscient and confident government compensating for the ham-handed, ineffectual efforts of a short-sighted private sector establishes a precedent for future interventions. Each new intervention sets the stage for the one that follows. The success of a protection racket like this one emboldens and empowers politicians to attempt bigger and more expensive scams.

There is no conceivable rationale or defense for Joining Forces, the job-placement initiative for veterans begun by Madams Obama and Biden. Its economic benefits are entirely illusory. Its aims are purely political. It is big-government bunkum at its most cynical and demagogic. And this conclusion derives not from political animus, but rather from the straightforward logical implications of Ms. Obama’s own words.