This morning I saw a new commercial for Ally bank, which you can view here. If you haven’t seen it, please watch it now so I don’t have to describe it below. It only takes 30 seconds.

Normally, I actually like the Ally bank commercials, using simple situations with children to show that some things banks do are wrong and Ally doesn’t do them. They’re funny and they make their point cleverly. (That they have to use children to make their point makes me wonder how stupid they think people are, but that’s a whole other issue…)

Ally is saying it’s unfair to give the new kid ice cream, and if you’re the less new kid you sympathize with him. Most of us went through it with cell phone companies at one point before they started equalizing the promos for new and existing customers. When new customers get a bonus that existing customers don’t get, that just doesn’t seem fair, right? We should all be treated equally, right?

Wrong.

It sounds great, but you have to see how treating everyone equally will actually play out in the market. In this case, credit card companies offer teaser rates to convince people to open up new lines of credit or transfer existing lines. I’ve done it — transferring higher balances to 0% for a year, knowing full well the rate will go up after that year, but in the meantime I’ve saved hundreds of dollars. If Ally is going to treat everyone equally, they either have to give everyone a year at a really low interest rate or give nobody that year. As the commercial makes clear, Ally doesn’t give anybody teaser rates.

The commercial is cute, but it plays on our notions of fairness in a twisted way. If Kid A is getting ice cream but Kid B isn’t, most of us think the fair solution is that both kids should get ice cream. But if you actually take this commercial to its logical extension, nobody’s getting ice cream. An honest commercial would have both kids going up to the ice cream cart and the man saying, “Sorry, new kid — since I can’t give him a scoop, I can’t give you a scoop. Nobody gets ice cream here.”

I always tell my students that when I grade their exams and homeworks, it’s not an exact science. I try to be consistent, but when you’re giving partial credit, sometimes you give one student 8/10 for an answer and another student 8.5/10 for a very similar answer. Usually there’s a slight difference, but sometimes after a long night of grading the words start to blur and I just make a mistake. I tell students to compare their grades with their friends’ to see if the grading on each question is consistent. And if they find a situation where their answers appear to be the same but their grades are different, they should bring their exams up to me. My remedy for the situation: I will either explain how their answers are different and why that resulted in a difference in their scores or, if the answers are basically the same, I will mark the 8.5 down to an 8 so that everything is fair. I say that as a joke, and they all laugh because it’s so obviously unfair to the student who received the 8.5

But that’s exactly what Ally is so proudly doing here.

I watched President Obama’s speech last night knowing it would be turn to cap-and-trade and clean energy, where he said this:

As we recover from this recession, the transition to clean energy has the potential to grow our economy and create millions of jobs -– but only if we accelerate that transition

I’ve heard this before, and I’ve heard the Republicans counter with the idea that it will ruin our economy. They cite the example of Spain, which Obama praised for their “green jobs,” where estimates are that 2 jobs were lost for every 1 green job created. And it got me thinking in big picture terms about this insane focus on jobs, jobs, jobs. If jobs are all that matter, then we should just take every employed person and make them work fewer hours so that the unemployed people are needed. But is that really good for our economy?

The advancements in real GDP per person (one measure of standard of living, as it is a measure of how much “stuff” someone can buy in a year) that we have had in the last century have come about through two things: technology and ingenuity. Technology inspires new products that create their own new industries, and also allows firms to do more with less. Ingenuity provides the fuel for constant change, new products and new ways of doing things.

One of the first posts I ever wrote here was about looking at progress by examining how long it takes one to work to buy a product. If products become cheaper, you have to work fewer hours to afford them, so you can either enjoy more leisure time or use your leftover income to buy more things. Since both of these are good things, we should want products to become cheaper.

Technology and ingenuity are driven by the goal of doing more with less, and for most firms that means fewer workers, not more. If you can find a new way of doing things, or a new machine you can use, and it allows you to fire people, as a profit-maximizing firm you are supposed to do that. Employment increases when this technological advance reduces costs, allowing you to lower prices, and in turn increasing the quantity of the product that consumers want to purchase. (From an intermediate micro approach, when the cost of capital falls, there is a substitution effect and an output effect. The substitution effect is that you use more capital and less labor. The output effect is that at lower cost, you can now produce more output. Whether employment increases or decreases depends in part on elasticity of demand and how responsive consumers are to the price cuts.) Similarly, when consumers try to find the best deal, it forces firms to cut costs and be efficient — and in this way the “invisible hand” of the market gives rise to an efficient result. Just focusing on consumer greed misses the point. Likewise, chastising firms for cutting jobs in one business ignores the end result that we get more efficiency and eventually those workers find jobs in new industries.

But doing more with less is not what President Obama is talking about at all. He wants to do less with more. He wants us producing less energy and using more workers to do it.

He said that he wants to make green energy the most profitable form of energy — but he wants to do this by taxing all other forms of energy. On the campaign trail, he said that under his program “electricity rates would necessarily skyrocket.” These two things are inconsistent with job growth in the economy.

It would be one thing if green energy were cheaper than other forms of energy, and by using this cheaper form of energy we could have even more energy than before, and this increased the amount of energy people used and this in turn created more green jobs. But that’s not going to happen. He wants us to produce LESS energy, not more. And he wants to increase the price of energy, not decrease it.

I don’t understand how requiring more people to produce the same amount of energy is a good thing. If you want to focus on the environmental impact, and fewer oil spills, in your push for cleaner energy production, that’s fine and I will cede that point. (It’s a difference of priorities, not economics.) But he’s also trying to make the claim for this move towards clean energy by claiming that it will create green jobs. And that simply ignores the facts that this increases energy costs to consumers, and this will cost us in other industries, as consumers have less disposable income — similar to what happens when gas prices increase.

The focus should be on output, not jobs. When a new textbook comes out and they add hundreds of new pages but don’t really say anything new, that’s not a good thing; that’s a waste of my students’ time. Increasing the inputs required without notably increasing the output is what we call inefficiency. This is what Obama wants to do — use more labor to produce our nation’s energy. Never before have I heard that using more labor to do a job is a good thing. By his logic, it’s a better result when I spend a lot of time working on a task instead of when I’m really good at it and get it done in half the time. I wonder what the economic advisors to this President are thinking.

This same kind of argument is at play in the California Senate campaign. The main argument I hear all the time from Democrats about Carly Fiorina, former CEO of Hewlett-Packard, is that she outsourced 30,000 jobs on her watch. Post dot-com bubble, HP was in a precarious position. She found that she could save the company by outsourcing some jobs and cutting those costs, and eventually the company doubled in size. On net, the company actually increased total American jobs because it was healthier and could expand in other areas. Focusing on a few specific jobs that were lost ignores the big picture, where total jobs increased.

Similarly, President Obama focuses on a few million green jobs that will be created by a cap-and-trade bill. But he downplays the facts that costs per kilowatt-hour will increase, and he ignores the simple principle that when we produce more output with less labor, it grows the economy and eventually spurs employment in other areas.