Arnold Kling  

Some Macro to read and to think about

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1. Doug Irwin offers a monetarist explanation of the 1937 recession, based on gold sterilization. Scott Sumner is no doubt pumping his fist in the air.

2. Daniel Little on the Great Factor-Price Equalization.

3. Here is a thought I had the other day. If American jobs are being outsourced to India, why don't Americans just move to India and take those jobs?

Two obvious answers: American don't want to move (adaptation friction). And Americans don't want to take lower pay (wage friction). The AS-AD model implicitly assumes that wage friction (or price friction, in some more exotic versions) is the relevant margin, so that you can cure unemployment with more AD. The PSST model assumes that adaptation friction is the relevant margin. People need to change cities, and, more importantly, discover new forms of comparative advantage.

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COMMENTS (5 to date)
Ted Craig writes:

3. The Indians don't want them.

Steve Horwitz writes:

Another adaptation friction is that even if folks were okay with relocating, if they're underwater on their mortgage, selling their current home might be a huge issue.

Jack writes:

I believe most people who need jobs "work to live", as opposed to "living to work" (otherwise they would not be unemployed). Local or regional amenities, culture, etc, give them a lot of utility. They'd be miserable in India. The other main issue, I think, is that people are optimistic. They still believe any day now they'll get their old job back.

steve writes:

"They still believe any day now they'll get their old job back."

I think this hits the nail on the head. I believe when people lose a lucrative job they wait it out for a couple of years before they seriously consider expensive retraining or a disruptive relocation such as moving to India for lower wages.

Mr. Econotarian writes:

Indian Emploment Visa requirements are spelled out here:

In a nutshell, you are only allowed to immigrate to India to take a highly skilled job that "no Indian is qualified for".

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