Nation of Beancounters

Are we including immigrants here?

Posted in Uncategorized by Navin Kumar on October 9, 2011

Good question from Arnold Kling at EconLog:

In an economy where some folks are very rich and many folks are unemployed, why are there not more personal servants? Why don’t Sergey Brin and Bill Gates have hundreds of people on personal retainer?

I pose this question as a way to think about labor markets and macroeconomics. Some possible answers:

1. It’s a supply problem. Nobody wants to be a personal servant. They think that their human capital will depreciate less if they remain unemployed.

2. It’s a demand problem. The marginal product of personal servants is very, very low. As Don Boudreaux points out, the impersonal servant of the market delivers us much higher quality goods and services than kings were able to obtain from all of their personal servants.

3. It’s a recalculation problem. Gates and Brin cannot figure out what they would do with hundreds of personal retainers. They cannot even find a personal retainer who can figure out what they would do with hundreds of personal retainers.

 

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