Just because a tire is flat at the bottom does not mean that the hole is there. The same can be said about labor markets. Concern about the scarcity of good jobs is fueling interest in labor-market interventions such as job centers that match workers with vacancies, training services to improve the skills of the unemployed, temporary wage subsidies, and more. Because getting more workers more quickly to good jobs is such an important policy goal, some countries create so-called delivery units in the president or prime minister’s office to focus on how to do it. But, as with a…

Eighteenth-century British economist Adam Smith has long been revered as the founder of modern economics, a thinker who, in his great works The Wealth of Nationsand The Theory of Moral Sentiments, discerned critical aspects of how market economies function. But the insights that earned Smith his exalted reputation are not nearly as unassailable as they once seemed. Perhaps the best known of Smith’s insights is that, in the context of well-functioning and well-regulated markets, individuals acting according to their own self-interest produce a good overall result. “Good,” in this context, means what economists today call “Pareto-optimal” – a state of…