Simple solution for unemployment

There is lot of literature on the subject with many ifs and buts.  Most of it points to stimulus to revive the economy. Because I am not an economist, I don't have much say on their effectiveness.

But I do have a very simple solution to the problem.  Declare Friday as a holiday. 

How does this works? We first need to understand the reasons for unemployment.

• Companies decide to reduce production and hence need less labor.
• Companies don't need more people. So the students coming out of college don't get any jobs.
• New methods of productions increase efficiency and require less people. 

Now lets assume government  declares Friday as a  holiday.

Good things that can happen:

• Companies only have 4 days to produce whatever they were producing in five days. 
• They need to employ more people (about 20%) to meet their weekly targets. 
• They might need to invest more in infrastructure to ensure that they can have working space/ machines etc for 20% more people.
• They might even decide to pay less per person from existing salaries, but they do need to invest in infrastructure and hire more people. Less paying jobs is infinitely more better than no job.

Bad things that can happen:

• They might ask people to work more hours per day. But labor regulations and bonus for extra work might not have linear cost structure. 
• They might reduce production further and increase prices. 

I can't completely predict what will happen, but if unemployment is caused by "excess labor", then this could be simple and cost effective way for governments to artificially reduce "excess labor" from the market. BTW instead of Friday, Monday will work too. Or if possible to enforce, 20% less working hours per week per person would also yield the same result. Actually government doesn't even needs to implement it, just declare it. Assuming 40 working hours per person, government can just announce that every 2.5% increase in unemployment will result in 1 hour less working hours per week. I am sure companies will optimize everything to find out what gives them optimal results. Who knows within a decade or two we will all work couple of hours a week ;)

Opportunity for github

Sell maintenance for open source projects. It could be a yearly payment or per problem based.

• They know the people who contribute
• They also know which areas they contribute 
• They can easily know who downloads
• Pay developers for fixing the bugs or adding features.

Products

What is the total cost of a car?

• Price tag on car 
• Fuel efficiency (subject to driving conditions) * Cost of fuel * Total distance  
• Maintenance Intervals * Average Maintenance Cost 
• Insurance Costs  
• If on debt, payable interest. 

What you finally pay for owning a car is much more than the price tag. I don't know of a single portal for cars which compares this total cost. I don't even know if this data is public. 

Product Equivalence 

Cars do compete with cars, but then they do complete with motor cycles and buses and autos. So competition for car could be a good combination of motor cycle (short distance), bus (little longer) and train (much longer).  

Conditional Products 

Car insurance is needed only if you have a car and so is car maintenance. Given that most car manufacturers in India only provide maintenance  through their own car dealers, the market is monopolistic. Most spare parts are produced only by the car manufacturers and retailed only through car dealers. The point essentially was conditional products skew the free market. Samsung refrigerators need water purifier that can only be purchased from Samsung. This is where I feel we need some law that forces manufacturers to make sure that the price of all parts put together in the car is not more than the car itself. Or at least this information is public so that we can calculate the expected maintenance cost. May be I should add repairability section also.

Returnability or Repeatability

The margin on small diamonds are over 50%. So you can buy it for $1000, but when you go back to sell it, it will only fetch $500. The value of car drops by 10% as you sign the check.  We only look at "a" sale in free market, but not the second sale of the same product or third. Basically what happens to product price over lifetime, given nothing major happens in the economy. No one seems to talk about this in economics. The question really is about extent of damage that can be caused by asymmetric information in free markets. If manufacturer is forced to define "Product Lifetime" then in a free market, manufacturers should be ready to take the product back given the percentage of "Product Lifetime" used by you.  

Rentability 

Technically a house is worth some function of rent it can fetch at max to be a reasonable investment. A taxi is worth it if "total cost" + labor (driver salary) < total profit. May be some taxi service can use cars parked in office all day and give people rent.  But that apart, many things are not rentable at all. Obviously this is not applicable to food. But if something is rentable, it gives some idea of its time value, which can then be used to calculate its total value, given the life time of the product. 

Product Lifetime

Mobile phones typically last 2-3 years unless stolen. TV and refrigerators can work for 10+ years unless new technologies make them obsolete. Software has much shorter lifetime. Laptops again hardly go beyond 3. Vegetables at edible probably for a week or so, even though the production cycle takes months. Cereals last longer. Movies have few weeks at max to get even. Cars run for 5+ years easily. The reason I am talking about product lifetimes is because they are useful when talking about rentability (above). They give a better idea of the utility of the product because you can divide this number by days or months or years and see if that is good enough for your budget. This also comes into picture if you need to resale it.  

Demand Supply Curve

We have two ways of looking at how prices impact demand. In case of price increase for a product,

• People consume less of the product.
• Number of people consuming that product goes down.

When rental prices go up, people just can't rent room for less hours. They become homeless. You can't buy half an apple from the market. Or have half the education, by attending few classes. You can't buy half a car or smaller seat in a bus for less price. 

I guess their is a big problem as well as a big opportunity here. How can we make most price changes impact only people consuming less instead of some people not consuming stuff at all. If nothing else, half an education is so much better than no education at all. 

Most measures of economy use money to represent growth. But may be if we start looking at units of things, the units that can be purchased and not abstract infinitely divided units, we will start making a better sense of how economy is doing. Are these units getting cheaper or costly because people can only buy them in units. 

The demand supply curve hides this important information from us. May be we should split it up.  Or may be other way is to make everything purchasable by making it infinitely dividable. That brings up whole new circus that I will explore in another post.

One way to do that is by sharing. We share the same roads, bridges, power plants, dams, hotel rooms, restaurants. Renting is also a form of sharing. May be people can share jobs. Instead of firing people, you make them work less and pay less. 15% less hours per day = 15% less pay = 100% employment which is better than 15% unemployment. People who work in shifts can share the same house - you sleep when I work and then I work when you sleep. May be schools for poor children where they can work half of the time to pay for their own education. 

Meaningful Currency

What does $1 means? And what is 1 rupee?  Currency in inherently meaningless unless compared with either other currencies or goods they can buy. What if we use a measure of currency which is inherently meaningful. Here are few examples:

What if prices of food products were written in "cost of meal for a poor child"? So the cost of one zinger burger at KFC would be around 15 "meals for a poor child".

What if price of car was written in "cost of safe drinking water per person". May be we have car that costs safe drinking water for 10K humans.

May be we could do the same for stock markets. Or put it in balance sheets for a company.

May be we could tell people their salary in cost of primary education for a child.

May be that will make us more human. May be it would be nice to live in less abstract world.