Interfluidity has a dream

by on February 15, 2011 at 7:54 pm in Books, Economics | Permalink

A few nights ago, a gentleman accosted me in a dream and declared himself to be “Tyrone”, Tyler Cowen’s evil twin. Tyrone told me that his brother had “as usual” got it all backwards.  In fact, he told me, we’ve been in the Great Stagnation for a century as a result of, rather than for the lack of, technological progress. The median household is experiencing wealth stagnation caused by technological change. Households are feeling the pain now more than in the past, even despite a relatively modest pace of change, because over the past few decades we have managed to avoid employing the sort of durable and effective countermeasures to stagnation that have succeeded in the past.

Here is much more, interesting throughout.  Here is another excellent sentence:

I worry that specialization in the information asymmetry industry could be an antidevelopment strategy for developed countries.

1 Floccina February 15, 2011 at 4:18 pm

I am smiling:

How could we be in the Great Stagnation we just recently got seedless watermelons, how good is that? Biotech has some real potential.

2 Andrew February 15, 2011 at 4:58 pm

Jay,

That was just one of my questions about Krugman's post. Unemployment is like a bucket in the rain, after a while all the buckets are filled about the same. I started to catalog all the things I could think of and then got too tired and gave up. After all, he'd just have another blog post up the next day.

3 joan February 15, 2011 at 10:22 pm

" There is a myth among neoliberal economists that labor markets have always “adjusted” sua sponte: that when laborers were displaced from farms, “higher value” factories arose to employ them; that when the factories were downsized and offshored, a more pleasant, higher-value service economy came to be; etc.

If people had still worked the same number of hour a week in 1950 as they did in 1900 something like the Great Depression would have been the new normal then.

4 Doc Merlin February 16, 2011 at 12:11 am

An interesting point: any technology that makes it easier for people do things themselves than what they would have hired out for will lower average wages and measured RGDP while improving standard of living.

5 Andrew February 16, 2011 at 3:03 am

Some technologies actually reduce the division of labor. This isn't a problem as long as there are other applications for the freed up labor. We have taken those applications and assumed they were a force of nature. There is still plenty of work to be done, but the transaction costs are higher.

6 Tony February 16, 2011 at 11:51 am

I'm a big fan of Tyler, but Tyrone makes an interesting argument.

On Tyler vs. Krugman … I think Tyler made an argument that was something like, "Maybe all the unemployed workers were *always* superfluous, but firms never got around to firing them because business was so good." (I'm paraphrasing, and this might not have been Tyler.)

If that's a true statement and unemployment really is structural, then that still points toward Keynesian stimulus of the type Krugman advocates. You just need to pump up AD so people are hiring other people to do stuff.

There's no point in waiting for structurally unemployed people to find something productive to do, because there isn't anything.

7 Tony February 17, 2011 at 4:19 am

Another explanation is that the financial market has simply failed. They decided it was easier to move money in big circles than to invest in real companies. If a fraction of the money that went into mortgage-backed securities went to real companies, there might not be any problem.

No fruit was picked, low-hanging or otherwise, because the financial system gorged on candy.

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