Mitt Romney claims to have created 100,000 jobs as the head of Bain Capital. In a new political add, the Obama campaign claims that he destroyed jobs. The both feed into a common error in voters’ understanding of economics.
Steven Rattner, who oversaw the auto rescue/bailout for President Obama, recognizes that both campaigns stray from economic reality in focusing on Bain’s role in job creation.
I think the ad is unfair. Mitt Romney made a mistake ever talking about the fact that he created 100,000 jobs. Bain Capital’s responsibility was not to create 100,000 jobs or some other number. It was to create profits for his investors, most of whom were pension funds, endowments and foundations. It did it superbly, acting within the rules and acting very responsibly and was a leading firm. So I do think to pick out an example of somebody who lost their job unfortunately, this is part of capitalism, this is part of life. And I don’t think there’s anything Bain Capital did that they need to be embarrassed about.
Bryan Caplan exquisitely explains this misunderstanding in The Myth of the Rational Voter.
The public often literally believes that labor is better to use than conserve. Saving labor, producing more goods with fewer man-hours, is widely perceived not as progress, but as a danger. i call this make-work bias, a tendency to underestimate the economic benefits of conserving labor. Where noneconomists see the destruction of jogs, economists see the essence of economic growth—the production of more with less.