What Is the Economy For?

With choice of work hours, we would still need planning to fine-tune the economy in order to avoid inflation, unemployment, and other economic disruption. Keynesian planning became popular in response to the unemployment of the Great Depression. Monetary planning became popular in response to the inflation of the 1970s. If there were a mass movement to shorter hours, new methods of planning would be needed to respond to slower growth.

In one example of the sort of planning we would need, the Canadian economist, Peter Victor, has created a computer model that lets him study how the Canadian economy would react to slower growth or to no growth. The results of running the model differ dramatically as he changes the values for macroeconomic variables such as the savings rate, the rates of public and private investment, and the length of the work week. In one run, the end of growth brings economic instability, high unemployment, and rising poverty. In another run with different values for these variables, the end of growth brings economic stability, reduces both poverty and unemployment by half, and reduces the ratio of debt to GDP by 75%. The second scenario has a higher savings rate, a lower rate of private investment, and a higher rate of public investment, and it avoids unemployment by reducing work hours.

There are very few macroeconomic studies of this sort, and more would be needed to help us develop policies to accommodate wide­spread work-time choice and the slower growth it could bring.

But the key difference in macroeconomic planning would be this: Today, we try to create economic growth rapid enough to give people standard 40-hour jobs. With work-time choice, we would try to create growth rapid enough to give people the number of work hours that they actually want.

Today, the economy must grow rapidly, whether or not people want more products, purely to create more 40-hour jobs. With work-time choice, people would work enough to buy the products they want, and then they could stop.

Our economic debate usually focuses solely on inflation and unemployment, technical questions that only economists can deal with. We also need to ask the underlying human question: What is the economy for?

Obviously, the purpose of the economy is to produce things that people actually want.

Everyone realizes this when they talk about work that we do for ourselves. For example, we do the job of patching the roof because we want to keep the rain from coming in, and when we have accomplished this goal, we stop. We do not keep tearing up the roof and patching it again in order to “create jobs” for ourselves.

But when it comes to the formal economy, we become totally mystified, and we believe that there is a benefit to “creating jobs.” We do not work to produce the things that we want to consume. Instead, we believe we must produce and consume more things to create more work.

If we thought about the human purpose of the economy, we would realize that in the formal economy, as in production for our own use, we should produce what we want to consume and then stop.

Economists have expert knowledge that helps them deal with inflation, unemployment and other economic problems, but ordinary people are the ones who should decide how much they want to consume. The technical questions about inflation and unemployment, which only economists can answer, should be subordinate to the human question about what balance of work and free time gives you the most satisfying life. People should be able to answer this human question for themselves, by making decisions about their own work hours based on their own desire for more income and more free time.