Arnold Kling  

Wisdom Worth Repeating

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Tyler Cowen repeats a tweet, and I will too. It comes from Masonomist Garett Jones.


Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions.

This is yet another difference between the labor force today and the labor force of the 1930's. Back then, workers mostly produced final output, not organizational capital.

Yet another reason not to try to apply 1930's Keynes to today's economy. Yet another reason that we could see a jobless recovery persist until profits improve.


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COMMENTS (6 to date)
david writes:

Yet another reason not to try to apply 1930's Keynes to today's economy.

So if we examine earlier industrial data we should be seeing more Keynesian behavior? A surprising acknowledgment.

Also, to be frank this observation looks like a argument for propping up failing industries to spread out periods of intersectoral shift. If industries can dismiss workers without substantially losing total output (at least for a while), then a 'recalculation' doesn't need to involve sustained periods of unemployment or recession.

Foobarista writes:

One other factor in the equation: the "organizational capital" can often be replaced by improved tech and use of tech, but for numerous reasons isn't when an existing human organization is in place.

But the human organization often goes away when a company is having hard times, and if the company survives, the organizational function is replaced, by a new, cheaper, tech-heavy team.

Hoover writes:

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Daniel Kuehn writes:

RE: "Yet another reason not to try to apply 1930's Keynes to today's economy."

You might want to explain this a little more, Arnold. There is demand for organizational capital just as there is demand for final output. I'm concerned about the jobless recovery problems, but I have no idea why you think this invalidates Keynes (not that I would simply reproduce Keynes from the 1930s either - we've learned a lot since then. But the Keynes that remains valid doesn't seem to be negated by the fact that a lot of work goes to producing organizational capital).

Ryan_Vann writes:

Even without labor being focused towards organizational capital, lags between labor and growth are to be expected. Add in that the contraction makes capital relatively cheap, and you will have a preference of substituting capital for labor hours.

Foobarista hit on this already.

Les writes:

"a jobless recovery persist until profits improve" does not sound like much of a recovery to me.

Without job creation or profit improvement it sounds more like Hamlet without the prince than a "recovery."

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