<blockquote>
<p>if they were to go out of business, there'd be more unemployment and people in economic troubles in total</p>
</blockquote>
<p>Not necessarily. Customers are paying money for the ill-gotten services of company X. This reduces the amount they have available to spend on other goods. If company X were banned (or perhaps more realistically its unethical practices were stopped and as a consequence it went out of business), its former customers would have more money to spend on other goods. If they chose to spend that money, they would provide additional business for other companies which would therefore need to employ more people.</p>
<p>Whether the net effect on employment and aggregate wage income would be neutral would depend on various imponderables including customers' marginal propensity to consume and the output-to-labour ratios in the relevant industries.  However, the notion that the direct reduction in employment and income from banning company X would not be offset by secondary effects as described above can be seen to be fallacious.</p>
<p>Given the comments below, I will add that it isn't relevant to the above argument whether any staff taken on by other companies include former employees of company X.  In a (typical) situation where there is some unemployment in an economy, the effect on overall economic welfare (as assessed by a suitable social welfare function) of some employees losing their jobs can be (partly or wholly) offset by others gaining employment.</p>

CC BY-SA 4.0
2023-04-24T07:02:32.873Z
Plus, these other companies are currently desperate to hire anyone they can find, so they should jump at the opportunity to put the former company X employees on their payroll.
gerrit
CC BY-SA 4.0
2023-04-24T11:41:56.950Z
@gerrit Or not, depending on how radioactive they consider these former company X employees to be. They have, after all, perpetuated quite questionable practices. Potential new employers might choose to look past that and consider it only the fault of the bosses of X, or they might not. This also depends on the exact details of the X scandal, and especially whether regular pest control employees knew about the more shady side of company X's practices.
Arthur
CC BY-SA 4.0
2023-04-24T12:20:10.540Z
@Arthur True, it depends on the risk of hiring someone who has followed illegal orders vs. the cost of keeping the vacancy unfilled.
gerrit
CC BY-SA 4.0
2023-04-25T06:45:24.773Z
@user253751 Might depend on the country.  I read that many employers in the US won't touch ex-convicts with a yardstick even twenty years after they were released from serving a few years for dealing marijuana as a teenager, but that effect would seem less prevalent in western Europe.
gerrit
CC BY-SA 4.0
2023-04-23T18:22:38.810Z
2023-04-25T14:05:09.787Z
2023-04-25T14:05:09.787Z
Adam Bailey
<p>You're correct that there is wastage in this setup. Let's consider the pest control company X. If the company generates revenue of $M from its services, that revenue is distributed among its workers and owners as salary and profit. However, the workers also incur labor costs in the form of disutility from their work.</p>
<p>One possible solution to achieve a Pareto superior outcome is to ban the company and raise taxes of $M from the people who were previously paying for pest control services. This revenue can then be distributed for free among the workers and owners. This outcome is Pareto superior because the workers are strictly better off - they receive the same amount of money without incurring any labor costs.</p>
<p>Alternatively, if it's necessary to provide employment for these workers, any job opportunity can be offered to them in return for the money that is being paid to them.</p>

CC BY-SA 4.0
2023-04-23T19:38:31.213Z
How would you define "wastage"?
Brian
CC BY-SA 4.0
2023-04-24T01:52:05.780Z
I mean wastage of resources. Resources such as labor can be diverted to some other activity or activities that are useful.
Amit
CC BY-SA 4.0
2023-04-24T14:05:08.347Z
If you ban the company and raise taxes, how will the people paying for pest control services control pests now? You've removed a service and haven't provided a way to pay for it. Presumably pests still exist and people will need some level of pest control.
Peter Olson
CC BY-SA 4.0
2023-04-24T14:38:29.510Z
Please read the information given in the question: "A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services." If X is banned, then pests don't exist. So these services are not needed.
Amit
CC BY-SA 4.0
2023-04-23T17:37:14.883Z
2023-04-23T17:37:14.883Z
Amit
<p>As stated, a pest control company that sends pests into people's homes to then offer to get rid of them, is essentially a rephrased version of the parable of the broken window: <a href="https://en.wikipedia.org/wiki/Parable_of_the_broken_window" rel="noreferrer">https://en.wikipedia.org/wiki/Parable_of_the_broken_window</a></p>
<p>The parable of the broken window suggests an idea of professional window-breakers who would stimulate the economy by breaking windows and thus increasing demand for the services of people who would replace the windows, thus increasing economic activity.</p>
<p>The usual refutation of this idea is that in absence of this artificially induced demand for replacing windows, people would spend their money elsewhere (for example, buying themselves things they actually want to have) and increase economic activity in other ways, in which they won't if they already spent all their money replacing windows. In essence, the refutation comes down to the idea that the window-breakers incur opportunity costs equal to their supposed economic stimulus, thus just moving your spending from one place to another instead of increasing your spending. And that other place could hire the workers that were displaced by the ban on window-breakers.</p>

CC BY-SA 4.0
2023-04-27T08:54:54.610Z
To an extent, yeah. But also a lot of people will try to make up for money they took out of savings by saving more later after a sudden expenditure and cutting their expenses for a while. At the extreme end, though, this refutation can break down. Take the example of Japan, where the savings rate is extremely high - many people there already save as much as they possibly can, so professional window-breakers could actually increase their total long-term spending and stimulate the economy.
Mash
CC BY-SA 4.0
2023-04-24T10:41:45.683Z
2023-04-24T10:42:16.467Z
2023-04-24T10:42:16.467Z
Mash
<p>This resembles Keynes' suggestion to use public funds to let people <a href="https://www.ekathimerini.com/opinion/33511/digging-holes/" rel="nofollow noreferrer">dig holes</a> to counteract a depression if nothing better can be found. Of course it would be much preferred to let people do something useful, in particular improve the infrastructure — but even something as useless as digging holes would be <em>better than doing nothing</em> and let the depression run its course.</p>
<p>Governments regularly use public administrative employment which only marginally contributes anything useful to the economy as a means to reduce unemployment. Letting all the useless public employees go would have a negative economic impact, at least for a while. Even reducing something as utterly unproductive as military personnel created problems after the cold war.</p>
<p>It is essential to note that this fiscal intervention in bad times had its counterpart in good times: Then, governments should reduce fiscal spending and not additionally boost the economy. Essentially, the government would <em>dampen</em> economic oscillations in both directions to reduce friction losses.</p>
<p>Your exterminator is not publicly funded but has a similar economic function as useless public employees or military personnel, at least if the customers create <em>additional</em> economic activity instead of just diverting funds, for example because they are forced to take on an emergency credit because of the perceived infestation. Like public work programs it is only useful in times of underemployment and economic contraction.</p>
<p>In times of prosperity, by contrast, it diverts consumption and precious resources, in particular labor, from places where they would generate profits, encourage investments and hence increase, as one hopes, the overall wealth of the society.</p>
<p>As a counter-argument to your conversation partner: Even in an economic downturn it would not only morally but also economically be better to contribute to the society's wealth or well-being instead of scamming people and producing nothing.</p>

CC BY-SA 4.0
2023-04-24T12:57:03.203Z
2023-04-24T14:28:51.930Z
2023-04-24T14:28:51.930Z
Peter - Reinstate Monica
<blockquote>
<p>I am arguing with another person about such a company X, and say that X is bad for the economy since it will deplete the money of average person simply. The person I am arguing with say that, if they were to go out of buisness, there'd be more unemployement and people in economic troubles in total, since there is no way to directly earn money in this country without a job.</p>
</blockquote>
<p>This is fallacy in long-run but can happen in short-run. Virtually all macroeconomists agree that long-run aggregate supply is vertical (e.g. see any macro textbook Blanchard et al Macroeconomics or Mankiw Macroeconomics etc). Result of this is that in long run Say's law applies and supply determines its own demand. Hence in long-run it does not matter whether you decide to shop at particular company <span class="math-container">$x$</span>, if company <span class="math-container">$x$</span> goes out of business all that happens is that labor and capital (and other factors of production) that were 'locked in' company <span class="math-container">$x$</span> becomes available for other companies to produce goods and services that people enjoy and aggregate demand in long-run is irrelevant.</p>
<p>However, your friend also has a grain of truth in his argument. Long-run in macroeconomy is time period over which prices are fully flexible and in real life such time period is often thought to be decade or even multiple decades (see Blanchard Macroeconomics pp 569). So it is important to think also what happens in short-run.</p>
<p>In short-run, basically what Adam Bailey said in his <a href="https://economics.stackexchange.com/a/55187/15517">answer</a> applies. That is what will actually happen to the employment is ambiguous as it will depend on not just your demand but myriad of other factors such as marginal propensity to consume etc. In short-run this <em>could</em> have negative effects on economy not just through higher unemployment but also additional negative general equilibrium effects stemming from the fact that these unemployed people will consume less which leads to less income for other people and employment and so on until economy stabilizes at some temporary level of production. Although whether this would occur would depend on number of factors and if the company is small then the negative effect will also be small even despite the general equilibrium feedback loops.</p>
<p>This being said, if the company is actually scamming people, e.g. putting pests into peoples houses, the company does not actually produce useful output, so we would be better off if the company would be shut down. The reason for that is that, assuming the company is only running scams and not doing any legitimate business, they are just wasting not just labor but also capital of society both of which are scarce resources. In such case, it might be even sensible to just pay those employees for some transitional period full wages through some government scheme and just shut the company down so at least capital is released to be used by other companies.</p>

CC BY-SA 4.0
2023-04-24T01:08:23.263Z
"Prices are fully flexible" Could you explain that?
Brian
CC BY-SA 4.0
2023-04-24T02:27:49.917Z
@TrystwithFreedom sure, in short run prices and wages are not flexible since they cannot be changed without any cost. For example, employees will have contract that stipulates some wage and employer can't just decide to pay less than what is in the contract. Rigidities like this result in upward sloping aggregate supply and in that case Say's law wont hold
1muflon1
CC BY-SA 4.0
2023-04-23T21:18:20.360Z
2023-04-23T21:18:20.360Z
1muflon1
<p>Lately I've heard this argument quite a bit--that coal and oil jobs will be destroyed if we limit emissions so we shouldn't.  They will, but as I understand it more jobs are being created in the renuable sectors than are being lost.</p>
<p>The newer jobs are different and require more training though, so the people who are actually mining coal might not be able to find a replacement job without training (and although it's hard to tell, they don't always want to retrain).</p>
<p>There was a similar argument with loggers.</p>
<p>In essence, I think a lot of these &quot;Arguments&quot; originate from the industry as excuses to keep the industry itself going. If instead of being a different industry (like Solar) a new coal-extraction process were to develop that removed the need for all the miners, the industry wouldn't hesitate to lay them off. This has happened repeatedly in many industries--and when it does I've rarely heard the &quot;But what about the economy!&quot; argument, instead they talk about how much more productive the new process will be and how good it will be for the economy.</p>
<p>As to your question of what is the counter-reasoning for this argument:  I always try to consider cases in the past where we've had a revolution in some industry and it caused this kind of upheavel, would we have stopped it?  If horse and buggy drivers didn't want to get licenses, should we have banned cars so they could keep their jobs?  Should we not allow computer auomation of accounting work so that we don't put accountants out of business?</p>
<p>Another point... In the micro-case you mentioned, your friend is missing a huge section of the analysis: the extra money that the families save will still get spent, they will just go towards industries that are actually providing a wanted service.  People will still be employed by the money, just not theives.  Even if the money is just banked, it will then be used by the bank to grant loans for others (Perhaps to build a house, which will employ quite a few people).</p>

CC BY-SA 4.0
2023-04-24T18:29:16.950Z
2023-04-24T18:29:16.950Z
Bill K
<p>the employees that lose their jobs, will do what most people do when the lose a job - go and get a new job. Hopefully this time they will get a job that actually benefits society.</p>

CC BY-SA 4.0
2023-04-25T14:43:13.087Z
2023-04-25T14:43:13.087Z
William
<blockquote>
<p>Suppose there is some industry whose profit is based on unethical business practices. Eg: A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services</p>
</blockquote>
<p>Maybe the problem is they don't agree with your premise: that that sort of thing is truly unethical.</p>
<p>Maybe they think those sort of practices are completely fair, or maybe they think every business is mildly unethical anyway, so &quot;what's the difference&quot;? (Note: <em>I</em> don't believe that, but <em>they</em> might.)</p>
<p>If you take that stance, then protecting those jobs makes more sense.</p>

CC BY-SA 4.0
2023-04-24T17:14:58.557Z
Lateral thinking
Brian
CC BY-SA 4.0
2023-04-24T18:13:49.833Z
My best advice is this: don't ask stackexchange, go and talk to those people. It's possible to have a productive conversation if you try to find your common ground to begin with, and just ask questions with an open mind. Resist the urge to disagree or argue: this is just an exercise to understand.
John von No Man
CC BY-SA 4.0
2023-04-24T16:51:18.860Z
2023-04-24T16:51:18.860Z
John von No Man
<p>Suppose there is some industry whose profit is based on unethical business practices. Eg: A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services. The business runs great due to weak laws. (I think a realistic analogy would be tech companies and the right to repair problem.)</p>
<p>I am arguing with another person about such a company X, and saying that X is bad for the economy since it will simply deplete the money of the average person. The person I am arguing with says that, if they were to go out of business, there'd be more unemployement and people in economic troubles in total, since there is no way to directly earn money in this country without a job.</p>
<p>While I still think it's bad after hearing their argument,  I still feel I can't give a good enough rebuttal to this argument.</p>
<p>Could a counter argument be framed based on pre-exisiting economic principles? Otherwise, if my position is the &quot;more wrong&quot; one, can someone explain why I am wrong?</p>

CC BY-SA 4.0
2023-04-24T03:36:35.553Z
Company X is perpetrating fraud by scamming people. If Society tolerates that, where do they draw the line? Imagine a thug who kneecaps people to force them to give him money. He is also creating employment for doctors, nurses, and other hospital staff, so are we going to lock him up and jeopardize the jobs for the hospital folk? Or are we going to let him go, and save money by not employing police, lawyers, judges, and prison guards? But what if the police, etc, then become unemployed? Easy. They can rob people instead...
Simon Crase
CC BY-SA 4.0
2023-04-24T09:12:30.717Z
Sounds like the [broken window fallacy](https://en.wikipedia.org/wiki/Parable_of_the_broken_window). Paying people to solve problems that shouldn't exist in the first place might look like useful economic activity on paper. But it is not, because the resources that company uses could be used in more useful ways if the problem is solved properly.
Philipp
CC BY-SA 4.0
2023-04-24T21:27:10.910Z
You could equate it to a form of stealing.
DKNguyen
CC BY-SA 4.0
2023-04-25T07:27:21.687Z
A similar argument that was heard in Germany very often was that electric cars are bad for the economy because the engines are so much simpler and a lot of industry in Germany is geared towards providing components for the very complex Diesel engines and other related technologies.
Mookuh
CC BY-SA 4.0
2023-04-25T20:37:53.953Z
@Philipp Thank you for the link. I hadn't encountered Bastiat before.
Simon Crase
CC BY-SA 4.0
2023-04-29T20:35:06.243Z
Can you say how a realistic analogy would be 'tech companies and the right to repair problem'?
Robbie Goodwin
CC BY-SA 4.0
2023-04-29T20:51:01.657Z
@Philipp That's clearly true but how could it ever be measured? I suspect you agree a doctor, dentist or car mechanic provide necessary services but even a hairdresser, let alone nail artists and perhaps anyone in the beauty industry do not.

I think that officially, 'gross domestic product' includes all the above… and in my own view, there is all the difference in the world between farmers, miners and their like, and the rest of us…
Robbie Goodwin
CC BY-SA 4.0
2023-04-30T08:16:41.513Z
@RobbieGoodwin You suspect wrong. I would actually mostly judge these professions the other way around. If the beauty industry makes people happy, they provide valuable services. Doctors, dentists and car mechanics are actually examples of professions that often repair problems that could be avoided in the first place through preventive healthcare and better cars.
Philipp
CC BY-SA 4.0
2023-04-30T11:13:16.167Z
@Philipp Oh, gosh. Making people happy fully justifies the astronomical earnings of sports people, singers or movie-stars and even to an extent, fat-cat housing developers but ranking hairdressers, nail artists and beauticians somehow 'above' doctors, dentists or car mechanics suggests you have a very different idea of the difference between 'need' and 'want' then anyone I'd find trustworthy.
Robbie Goodwin
<microeconomics><political-economy>
Understanding the "But they will lose jobs!" argument
Brian
# Understanding the "But they will lose jobs!" argument

(Asked by: username_0 on 2023-04-23)

Suppose there is some industry whose profit is based on unethical business practices. Eg: A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services. The business runs great due to weak laws. (I think a realistic analogy would be tech companies and the right to repair problem.)

I am arguing with another person about such a company X, and saying that X is bad for the economy since it will simply deplete the money of the average person. The person I am arguing with says that, if they were to go out of business, there'd be more unemployement and people in economic troubles in total, since there is no way to directly earn money in this country without a job.

While I still think it's bad after hearing their argument, I still feel I can't give a good enough rebuttal to this argument.

Could a counter argument be framed based on pre-exisiting economic principles? Otherwise, if my position is the "more wrong" one, can someone explain why I am wrong?

**Tags:** microeconomics, political-economy

> **Comments:**
> **username_1**: Company X is perpetrating fraud by scamming people. If Society tolerates that, where do they draw the line? Imagine a thug who kneecaps people to force them to give him money. He is also creating employment for doctors, nurses, and other hospital staff, so are we going to lock him up and jeopardize the jobs for the hospital folk? Or are we going to let him go, and save money by not employing police, lawyers, judges, and prison guards? But what if the police, etc, then become unemployed? Easy. They can rob people instead...  
> **username_2**: Sounds like the [broken window fallacy](https://en.wikipedia.org/wiki/Parable_of_the_broken_window). Paying people to solve problems that shouldn't exist in the first place might look like useful economic activity on paper. But it is not, because the resources that company uses could be used in more useful ways if the problem is solved properly.  
> **username_3**: You could equate it to a form of stealing.  
> **username_4**: A similar argument that was heard in Germany very often was that electric cars are bad for the economy because the engines are so much simpler and a lot of industry in Germany is geared towards providing components for the very complex Diesel engines and other related technologies.  
> **username_1**: @username_2 Thank you for the link. I hadn't encountered Bastiat before.  
> **username_5**: Can you say how a realistic analogy would be 'tech companies and the right to repair problem'?  
> **username_5**: @username_2 That's clearly true but how could it ever be measured? I suspect you agree a doctor, dentist or car mechanic provide necessary services but even a hairdresser, let alone nail artists and perhaps anyone in the beauty industry do not.  I think that officially, 'gross domestic product' includes all the above… and in my own view, there is all the difference in the world between farmers, miners and their like, and the rest of us…  
> **username_2**: @RobbieGoodwin You suspect wrong. I would actually mostly judge these professions the other way around. If the beauty industry makes people happy, they provide valuable services. Doctors, dentists and car mechanics are actually examples of professions that often repair problems that could be avoided in the first place through preventive healthcare and better cars.  
> **username_5**: @username_2 Oh, gosh. Making people happy fully justifies the astronomical earnings of sports people, singers or movie-stars and even to an extent, fat-cat housing developers but ranking hairdressers, nail artists and beauticians somehow 'above' doctors, dentists or car mechanics suggests you have a very different idea of the difference between 'need' and 'want' then anyone I'd find trustworthy.  

---

## 8 answers

### Answer by username_6 on 2023-04-23. Score: 24

> if they were to go out of business, there'd be more unemployment and people in economic troubles in total

Not necessarily. Customers are paying money for the ill-gotten services of company X. This reduces the amount they have available to spend on other goods. If company X were banned (or perhaps more realistically its unethical practices were stopped and as a consequence it went out of business), its former customers would have more money to spend on other goods. If they chose to spend that money, they would provide additional business for other companies which would therefore need to employ more people.

Whether the net effect on employment and aggregate wage income would be neutral would depend on various imponderables including customers' marginal propensity to consume and the output-to-labour ratios in the relevant industries. However, the notion that the direct reduction in employment and income from banning company X would not be offset by secondary effects as described above can be seen to be fallacious.

Given the comments below, I will add that it isn't relevant to the above argument whether any staff taken on by other companies include former employees of company X. In a (typical) situation where there is some unemployment in an economy, the effect on overall economic welfare (as assessed by a suitable social welfare function) of some employees losing their jobs can be (partly or wholly) offset by others gaining employment.

> **Comments:**
> **username_7**: Plus, these other companies are currently desperate to hire anyone they can find, so they should jump at the opportunity to put the former company X employees on their payroll.  
> **username_8**: @username_7 Or not, depending on how radioactive they consider these former company X employees to be. They have, after all, perpetuated quite questionable practices. Potential new employers might choose to look past that and consider it only the fault of the bosses of X, or they might not. This also depends on the exact details of the X scandal, and especially whether regular pest control employees knew about the more shady side of company X's practices.  
> **username_7**: @username_8 True, it depends on the risk of hiring someone who has followed illegal orders vs. the cost of keeping the vacancy unfilled.  
> **username_7**: @user253751 Might depend on the country.  I read that many employers in the US won't touch ex-convicts with a yardstick even twenty years after they were released from serving a few years for dealing marijuana as a teenager, but that effect would seem less prevalent in western Europe.  

---

### Answer by username_11 on 2023-04-24. Score: 15

As stated, a pest control company that sends pests into people's homes to then offer to get rid of them, is essentially a rephrased version of the parable of the broken window: <https://en.wikipedia.org/wiki/Parable_of_the_broken_window>

The parable of the broken window suggests an idea of professional window-breakers who would stimulate the economy by breaking windows and thus increasing demand for the services of people who would replace the windows, thus increasing economic activity.

The usual refutation of this idea is that in absence of this artificially induced demand for replacing windows, people would spend their money elsewhere (for example, buying themselves things they actually want to have) and increase economic activity in other ways, in which they won't if they already spent all their money replacing windows. In essence, the refutation comes down to the idea that the window-breakers incur opportunity costs equal to their supposed economic stimulus, thus just moving your spending from one place to another instead of increasing your spending. And that other place could hire the workers that were displaced by the ban on window-breakers.

> **Comments:**
> **username_11**: To an extent, yeah. But also a lot of people will try to make up for money they took out of savings by saving more later after a sudden expenditure and cutting their expenses for a while. At the extreme end, though, this refutation can break down. Take the example of Japan, where the savings rate is extremely high - many people there already save as much as they possibly can, so professional window-breakers could actually increase their total long-term spending and stimulate the economy.  

---

### Answer by username_9 on 2023-04-23. Score: 8

You're correct that there is wastage in this setup. Let's consider the pest control company X. If the company generates revenue of $M from its services, that revenue is distributed among its workers and owners as salary and profit. However, the workers also incur labor costs in the form of disutility from their work.

One possible solution to achieve a Pareto superior outcome is to ban the company and raise taxes of $M from the people who were previously paying for pest control services. This revenue can then be distributed for free among the workers and owners. This outcome is Pareto superior because the workers are strictly better off - they receive the same amount of money without incurring any labor costs.

Alternatively, if it's necessary to provide employment for these workers, any job opportunity can be offered to them in return for the money that is being paid to them.

> **Comments:**
> **username_0**: How would you define "wastage"?  
> **username_9**: I mean wastage of resources. Resources such as labor can be diverted to some other activity or activities that are useful.  
> **username_10**: If you ban the company and raise taxes, how will the people paying for pest control services control pests now? You've removed a service and haven't provided a way to pay for it. Presumably pests still exist and people will need some level of pest control.  
> **username_9**: Please read the information given in the question: "A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services." If X is banned, then pests don't exist. So these services are not needed.  

---

### Answer by username_13 on 2023-04-23. Score: 5

> I am arguing with another person about such a company X, and say that X is bad for the economy since it will deplete the money of average person simply. The person I am arguing with say that, if they were to go out of buisness, there'd be more unemployement and people in economic troubles in total, since there is no way to directly earn money in this country without a job.

This is fallacy in long-run but can happen in short-run. Virtually all macroeconomists agree that long-run aggregate supply is vertical (e.g. see any macro textbook Blanchard et al Macroeconomics or Mankiw Macroeconomics etc). Result of this is that in long run Say's law applies and supply determines its own demand. Hence in long-run it does not matter whether you decide to shop at particular company $x$, if company $x$ goes out of business all that happens is that labor and capital (and other factors of production) that were 'locked in' company $x$ becomes available for other companies to produce goods and services that people enjoy and aggregate demand in long-run is irrelevant.

However, your friend also has a grain of truth in his argument. Long-run in macroeconomy is time period over which prices are fully flexible and in real life such time period is often thought to be decade or even multiple decades (see Blanchard Macroeconomics pp 569). So it is important to think also what happens in short-run.

In short-run, basically what username_6 said in his [answer](https://economics.stackexchange.com/a/55187/15517) applies. That is what will actually happen to the employment is ambiguous as it will depend on not just your demand but myriad of other factors such as marginal propensity to consume etc. In short-run this *could* have negative effects on economy not just through higher unemployment but also additional negative general equilibrium effects stemming from the fact that these unemployed people will consume less which leads to less income for other people and employment and so on until economy stabilizes at some temporary level of production. Although whether this would occur would depend on number of factors and if the company is small then the negative effect will also be small even despite the general equilibrium feedback loops.

This being said, if the company is actually scamming people, e.g. putting pests into peoples houses, the company does not actually produce useful output, so we would be better off if the company would be shut down. The reason for that is that, assuming the company is only running scams and not doing any legitimate business, they are just wasting not just labor but also capital of society both of which are scarce resources. In such case, it might be even sensible to just pay those employees for some transitional period full wages through some government scheme and just shut the company down so at least capital is released to be used by other companies.

> **Comments:**
> **username_0**: "Prices are fully flexible" Could you explain that?  
> **username_13**: @TrystwithFreedom sure, in short run prices and wages are not flexible since they cannot be changed without any cost. For example, employees will have contract that stipulates some wage and employer can't just decide to pay less than what is in the contract. Rigidities like this result in upward sloping aggregate supply and in that case Say's law wont hold  

---

### Answer by username_12 on 2023-04-24. Score: 4

This resembles Keynes' suggestion to use public funds to let people [dig holes](https://www.ekathimerini.com/opinion/33511/digging-holes/) to counteract a depression if nothing better can be found. Of course it would be much preferred to let people do something useful, in particular improve the infrastructure — but even something as useless as digging holes would be *better than doing nothing* and let the depression run its course.

Governments regularly use public administrative employment which only marginally contributes anything useful to the economy as a means to reduce unemployment. Letting all the useless public employees go would have a negative economic impact, at least for a while. Even reducing something as utterly unproductive as military personnel created problems after the cold war.

It is essential to note that this fiscal intervention in bad times had its counterpart in good times: Then, governments should reduce fiscal spending and not additionally boost the economy. Essentially, the government would *dampen* economic oscillations in both directions to reduce friction losses.

Your exterminator is not publicly funded but has a similar economic function as useless public employees or military personnel, at least if the customers create *additional* economic activity instead of just diverting funds, for example because they are forced to take on an emergency credit because of the perceived infestation. Like public work programs it is only useful in times of underemployment and economic contraction.

In times of prosperity, by contrast, it diverts consumption and precious resources, in particular labor, from places where they would generate profits, encourage investments and hence increase, as one hopes, the overall wealth of the society.

As a counter-argument to your conversation partner: Even in an economic downturn it would not only morally but also economically be better to contribute to the society's wealth or well-being instead of scamming people and producing nothing.


---

### Answer by username_14 on 2023-04-24. Score: 1

Lately I've heard this argument quite a bit--that coal and oil jobs will be destroyed if we limit emissions so we shouldn't. They will, but as I understand it more jobs are being created in the renuable sectors than are being lost.

The newer jobs are different and require more training though, so the people who are actually mining coal might not be able to find a replacement job without training (and although it's hard to tell, they don't always want to retrain).

There was a similar argument with loggers.

In essence, I think a lot of these "Arguments" originate from the industry as excuses to keep the industry itself going. If instead of being a different industry (like Solar) a new coal-extraction process were to develop that removed the need for all the miners, the industry wouldn't hesitate to lay them off. This has happened repeatedly in many industries--and when it does I've rarely heard the "But what about the economy!" argument, instead they talk about how much more productive the new process will be and how good it will be for the economy.

As to your question of what is the counter-reasoning for this argument: I always try to consider cases in the past where we've had a revolution in some industry and it caused this kind of upheavel, would we have stopped it? If horse and buggy drivers didn't want to get licenses, should we have banned cars so they could keep their jobs? Should we not allow computer auomation of accounting work so that we don't put accountants out of business?

Another point... In the micro-case you mentioned, your friend is missing a huge section of the analysis: the extra money that the families save will still get spent, they will just go towards industries that are actually providing a wanted service. People will still be employed by the money, just not theives. Even if the money is just banked, it will then be used by the bank to grant loans for others (Perhaps to build a house, which will employ quite a few people).


---

### Answer by username_15 on 2023-04-25. Score: 1

the employees that lose their jobs, will do what most people do when the lose a job - go and get a new job. Hopefully this time they will get a job that actually benefits society.


---

### Answer by username_16 on 2023-04-24. Score: 0

> Suppose there is some industry whose profit is based on unethical business practices. Eg: A pest control company X, who themselves send pests into people's houses, so as to later earn money from offering services

Maybe the problem is they don't agree with your premise: that that sort of thing is truly unethical.

Maybe they think those sort of practices are completely fair, or maybe they think every business is mildly unethical anyway, so "what's the difference"? (Note: *I* don't believe that, but *they* might.)

If you take that stance, then protecting those jobs makes more sense.

> **Comments:**
> **username_0**: Lateral thinking  
> **username_16**: My best advice is this: don't ask stackexchange, go and talk to those people. It's possible to have a productive conversation if you try to find your common ground to begin with, and just ask questions with an open mind. Resist the urge to disagree or argue: this is just an exercise to understand.  

---

