June 15, 2012

Where Paul Krugman, Keynes are vulnerable - Howard Gold's No-Nonsense Investing - MarketWatch

Howard Gold Believes Krugman and Keynes are Wrong for Today's Economy.  I agree.

I believe America's unemployment is structural for a number of reasons, not the least of which is the impact of technology.

Growing the economy is complicated by the structural changes and dislocations from accelerating technological change which are ‘eating’ traditional jobs,  jobs that previously required humans, previously low-skill, low-priced humans. What’s happening now is that even higher skills are being replaced by technological efficiencies.

Already in many industries and occupations, we have seen that digital and robotic technologies have permanently displaced jobs and skills. With investments in these technologies companies can increase economic output without the corresponding labor component that was both expected and experienced experienced by workers in the past as America exited economic doldrums. The upshot is that many jobs simply will not return and the doldrums are more or less permanent.

As only one example among many, think about the implications in the not too distant future of cars and trucks that drive themselves more adroitly and safely than people can. Google and several other companies are developing such vehicles and as states allow them to to be registered and operated, we can expect more jobs to disappear.

The high skills required to service this new economy are in short supply because the education system lags behind the pace of technological change. Meanwhile, our self gratifying culture works against people desiring to be equipped to work hard to succeed. The ‘entitlement mentality’ pervades far too many lives. We see it in the growing expectations of a government that cannot afford these demands in an economy that is predicted to grow at half its historic rate into the future.

"But what if the problem isn’t only a dearth of demand? Krugman is adamant that current U.S. unemployment is not structural — i.e., that it has deeper causes such as a mismatch of skills between workers and the available jobs.
“…Structural unemployment is a fake problem, which mainly serves as an excuse for not pursuing real solutions,” he wrote. “…All the facts suggest that high unemployment in America is the result of inadequate demand — full stop.”
Actually, economists are divided on this issue — studies by the Chicago and San Francisco Fed support Krugman, while a recent International Monetary Fund paper pegged the structural contribution to long-term U.S. unemployment at 40%. That’s two million people, hardly trivial."
'via Blog this'

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