[Vision2020] Easy Useless Economics

[Art Deco]

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May 10, 2012
Easy Useless Economics By PAUL
KRUGMAN<http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per>

A few days ago, I read an authoritative-sounding paper in The American
Economic Review, one of the leading journals in the field, arguing at
length that the nation’s high unemployment rate had deep structural roots
and wasn’t amenable to any quick solution. The author’s diagnosis was that
the U.S. economy just wasn’t flexible enough to cope with rapid
technological change. The paper was especially critical of programs like
unemployment insurance, which it argued actually hurt workers because they
reduced the incentive to adjust.

O.K., there’s something I didn’t tell you: The paper in question was
published in June 1939. Just a few months later, World War II broke out,
and the United States — though not yet at war itself — began a large
military buildup, finally providing fiscal stimulus on a scale commensurate
with the depth of the slump. And, in the two years after that article about
the impossibility of rapid job creation was published, U.S. nonfarm
employment rose 20 percent — the equivalent of creating 26 million jobs
today.

So now we’re in another depression, not as bad as the last one, but bad
enough. And, once again, authoritative-sounding figures insist that our
problems are “structural,” that they can’t be fixed quickly. We must focus
on the long run, such people say, believing that they are being
responsible. But the reality is that they’re being deeply irresponsible.

What does it mean to say that we have a structural unemployment problem?
The usual version involves the claim that American workers are stuck in the
wrong industries or with the wrong skills. A widely cited recent article by
Raghuram Rajan of the University of Chicago asserts that the problem is the
need to move workers out of the “bloated” housing, finance and government
sectors.

Actually, government employment per capita has been more or less flat for
decades, but never mind — the main point is that contrary to what such
stories suggest, job losses since the crisis began haven’t mainly been in
industries that arguably got too big in the bubble years. Instead, the
economy has bled jobs across the board, in just about every sector and
every occupation, just as it did in the 1930s. Also, if the problem was
that many workers have the wrong skills or are in the wrong place, you’d
expect workers with the right skills in the right place to be getting big
wage increases; in reality, there are very few winners in the work force.

All of this strongly suggests that we’re suffering not from the teething
pains of some kind of structural transition that must gradually run its
course but rather from an overall lack of sufficient demand — the kind of
lack that could and should be cured quickly with government programs
designed to boost spending.

So what’s with the obsessive push to declare our problems “structural”?
And, yes, I mean obsessive. Economists have been debating this issue for
several years, and the structuralistas won’t take no for an answer, no
matter how much contrary evidence is presented.

The answer, I’d suggest, lies in the way claims that our problems are deep
and structural offer an excuse for not acting, for doing nothing to
alleviate the plight of the unemployed.

Of course, structuralistas say they are not making excuses. They say that
their real point is that we should focus not on quick fixes but on the long
run — although it’s usually far from clear what, exactly, the long-run
policy is supposed to be, other than the fact that it involves inflicting
pain on workers and the poor.

Anyway, John Maynard Keynes had these peoples’ number more than 80 years
ago. “But this *long run,*” he wrote, “is a misleading guide to current
affairs. *In the long run* we are all dead. Economists set themselves too
easy, too useless a task if in tempestuous seasons they can only tell us
that when the storm is long past the sea is flat again.”

I would only add that inventing reasons not to do anything about current
unemployment isn’t just cruel and wasteful, it’s bad long-run policy, too.
For there is growing evidence that the corrosive effects of high
unemployment will cast a shadow over the economy for many years to come.
Every time some self-important politician or pundit starts going on about
how deficits are a burden on the next generation, remember that the biggest
problem facing young Americans today isn’t the future burden of debt — a
burden, by the way, that premature spending cuts probably make worse, not
better. It is, rather, the lack of jobs, which is preventing many graduates
from getting started on their working lives.

So all this talk about structural unemployment isn’t about facing up to our
real problems; it’s about avoiding them, and taking the easy, useless way
out. And it’s time for it to stop.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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