Thomas Friedman Hasn't Heard About the Recession

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Wednesday, 21 November 2012 05:30

We know that because he writes that in a budget deal it is really important that:

"everyone has to take their castor oil — the rich more, the middle class some — make them feel that it will enable us all to get stronger."

People who know about the recession would likely feel the middle class has taken plenty of castor oil. Many have been without work or involuntarily working part time over the last five years. They have also seen much of their wealth disappear with the collapse of the housing bubble.

Friedman also seems to have a bizarre belief that the country will be better off if more people give up good jobs and use their life savings to start businesses that will fail. Friedman has apparently misunderstood research on start-ups, which shows them to be large net job creators. He thinks that more start-ups will therefore mean more jobs.

This of course does not follow, since the marginal start-up that we can induce through more start-up friendly policy is virtually certain to do worse than the average start-up. If we divert resources from existing businesses to have 50 percent more start-ups, there is no reason to believe that this would increase job growth or improve the economy's performance, since the overwhelming majority of these start-ups will be out of business in less than a decade.