Arnold Kling  

Easier to Break than to Fix

PRINT
The AI Cure... Don Lavoie on Soviet "Growth"...

Nick Rowe writes,


Negative AD shocks will do harm to PSST, but positive AD shocks cannot do good to PSST.

The issue of asymmetry in macroeconomic phenomena is important.

I would speculate that in a modern economy the process of creative destruction is more likely to create a rapid loss of jobs than a rapid increase in jobs. For example, jobs migrate from sectors where productivity grows faster than demand to sectors where demand grows faster than productivity. In order to get a rapid increase in jobs, you would need to get a rapid increase in demand in a sector where productivity is growing slowly. That may never happen (you can get a gradual increase in demand in a low-productivity-growth sector, but not a rapid increase in demand). In order to get a rapid decrease in jobs, you would need to get a rapid increase in productivity in a sector where demand is rising slowly. That may be rare, but it does happen.

To take another example, suppose that because of a change in political climate, transportation, or communication technology, a new trading opportunity arises, base on new patterns of comparative advantage. Is it not more likely that this new trading pattern will economize on labor rather than use it more intensively?

When labor resources are released by gains in productivity and new trading patterns, these resources gradually get absorbed by new industries. Sometimes, labor resources are released much more rapidly than they are re-absorbed.


Comments and Sharing


CATEGORIES: Macroeconomics



COMMENTS (3 to date)
Lance writes:
In order to get a rapid increase in jobs, you would need to get a rapid increase in demand in a sector where productivity is growing slowly. That may never happen

Starbucks?

Vadim writes:
In order to get a rapid increase in jobs, you would need to get a rapid increase in demand in a sector where productivity is growing slowly. That may never happen

This isn't necessarily true. You could get rapid job growth through slow increases in demand across many sectors.

Dave writes:

I think the answer likely lies in some set of concepts from product diffusion vs disruption, technology shocks on the production side, and in the way fitness landscapes change over time.

Comments for this entry have been closed
Return to top