Unemployment as a social cost

Paolo Ramazzotti and Marco Rangone
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Marco Rangone: University of Padova

No 20-2004, Working Papers from Macerata University, Department of Finance and Economic Sciences

Abstract:

Over the last decade, workfare programmes provided support to the unemployed only insofar as they were willing to accept a job. The theoretical underpinnings of these programmes are that institutional constraints prevent labour supply from adjusting to the technologically determined requirements of labour demand. We contend that when individuals look for a job, they generally want to take into account non-monetary features such as occupational status. Status cannot be traded, it usually is complementary to income, it determines lifestyles and life possibilities. As for labour demand, its requirements do not reflect efficient behaviour and technical constraints because business ”efficiency” cannot be taken to be a measure of social efficiency and technology cannot be used as a benchmark to assess the efficiency of business conduct. We suggest that Sen’s notion of capabilities may constitute an appropriate benchmark to assess the social efficiency of the economic system. This leads us to a few policy implications. The ”capabilities benchmark” leads us to stress the importance of freedom to choose how to conduct one’s life. Acting in favour of freedom involves the understanding of how business strategies affect learning patterns and available choice sets. It also involves the assessment of policy issues - such as cooperation between the scientific community and business, scientific freedom, educational goals and their institutional implementation, and unemployment relief systems - which may influence the relation between business strategies and social learning.

Date: 2004-10, Revised 2008-11
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Citations: View citations in EconPapers (1)

Published in Wolfram Elsner, Pietro Frigato and Paolo Ramazzotti (Eds.), Social Costs and Public Action in Modern Capitalism. Essays inspired by Karl William Kapp’s Theory of Social Costs, London, Routledge, 2006

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