New Jersey might let drivers pump their own gas — thank the labor market

For decades, New Jersey has held steadfast to a law prohibiting gas station customers from pumping their own tanks. That may be about to change, in ways that contain a surprising insight about how the economy works.

Why it matters: If New Jersey backs off its gas pumping rules, it will show the power of "endogenous productivity growth," the idea that tight labor markets can create powerful incentives to deploy workers in ways that generate the most economic value.

It's hard to argue that legally required gas station attendants create a lot of economic value, given that in most of the U.S. customers happily pump gas themselves.

• If the law were changed, and people pumping gas in New Jersey went to work in jobs more highly valued by the marketplace, that would amount to higher wages for them and higher economic output for the state.

The labor shortage has made state legislators more receptive to relaxing the rules, Politico reports. That's how the issue connects to a broader economic idea.

• In effect, when labor is scarce, it forces employers to find ways to get more economic benefit from each hour of labor — which ultimately fuels higher wages and standards of living.

The bottom line: If New Jersey deals with the current economic situation by loosening its gas-pumping rules, it will show a different way tight labor markets can generate productivity gains — through political action.