Saturday, July 17, 2004

Is Brad DeLong encouraging us to eat the unemployed?
We live in a time when productivity is growing at between 3% and 4% per year--and thus when real earnings if the labor market were in balance would be growing at the same rate. Yet that's not what's happening: the past year alone has seen the gap between real earnings and labor productivity widen by 5%.

I can't see any way to read this other than that there is *enormous* excess supply in the labor market, and that we are still very far away from anything that might be called full employment--enormous slack in the economy.
One assumes DeLong doesn't have a modest proposal up his sleeve, but he does fall victim to typical liberal economic rhetoric when he pegs excess labor as the cause of the trouble rather than a shortage of capital -- or rather a shortage of capital available to serve the public interest.

That being said, I have heard that a child will make two dishes at an entertainment for friends, and when the family dines alone, the fore or hind quarter will make a reasonable dish . . .


At 2:37 AM, Anonymous Anonymous said...

I screwed up by putting this in the wrong article. here we go:

Those are two aspects of the same thing. Money (and capital) not being made available to useful and productive ventures is what is causing "excess" labor and capacity. And the resulting income shortfall on the part of "excess" workers also contributes to resources not being made available.

I'd say your thesis describes a "more causative" phenomenon than Brad's. But wouldn't you agree that increased productivity is also part of the picture, and exacerbates the "excess"?


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