Why “structural unemployment” is a dangerous copout

One of the privileges of blogging is that you get to stick your own title back on an essay, after the editors at The Economist change it.  Here is my third essay over at The Economist’s “By Invitation.”

Why “structural unemployment” is a dangerous copout

I suppose that’s bad grammar, but it made sense to me.

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15 Responses to “Why “structural unemployment” is a dangerous copout”

  1. Gravatar of Lorenzo from Oz Lorenzo from Oz
    26. July 2010 at 14:03

    That link, it does not go where you think it goes …

  2. Gravatar of marcus nunes marcus nunes
    26. July 2010 at 14:10

    It goes to “The Opinionato” at the NYT

  3. Gravatar of marcus nunes marcus nunes
    26. July 2010 at 14:12

    Correct link:

  4. Gravatar of scott sumner scott sumner
    26. July 2010 at 16:26

    Thanks Lorenzo and marcus. It’s fixed now. The article on free will was better anyway.

  5. Gravatar of D. Watson D. Watson
    26. July 2010 at 19:21

    Quite the name change. And the link was still wrong in my Google Reader just now.

  6. Gravatar of Lee Kelly Lee Kelly
    26. July 2010 at 20:02

    Structural unemployment is real, I think. However, until monetary order is restored, the “recalculation” cannot happen, because the calculator (i.e. the network of price signals) is broken.

    A doctor may complain that different parts of the body are not receiving the nutrients they need. But until the problem with the circulatory system is resolved, nothing much can be done to reallocate nutrients to where they are needed.

    Money is the lifeblood of the economy, and the Fed is like a Medieval doctor performing bloodletting on an unsuspecting patient.

    Okay … perhaps I got a bit carried away with that analogy, but you get the point.

  7. Gravatar of Lorenzo from Oz Lorenzo from Oz
    26. July 2010 at 22:59

    No problem: and a chance to slip in a The Princess Bride reference is one to be seized.

  8. Gravatar of Luis H Arroyo Luis H Arroyo
    27. July 2010 at 03:16

    Good artivle. I agree.
    One question: do you think that so little gap between the current 4% and the desired 5% in NAD make so high diference?
    On the other hand, I would say that the current NGDP is going to a 3% or less rate of growth.
    I agree also wtih Lee Kelly: “he calculator (i.e. the network of price signals) is broken.”

  9. Gravatar of Bill Woolsey Bill Woolsey
    27. July 2010 at 03:49


    Your argument shows the problem of focusing on growth rates. Sumner did say that the goal is to get nominal GDP back to its previous trend line. I usually say, “growth path.”

    If nominal GDP returns to a 5% growth rate from its current level, it will never return to its 1984-2008 growth path.

    If the inflation rate remains below its 1984-2008 rate, (less than 2%) then sure, eventually real GDP will return to capacity (and maybe its 1984-2008 growth path.)

    But the goal should be to promptly return nominal GDP to its past growth path. That requires something like an 11% growth rate for nominal GDP over the next year.

  10. Gravatar of marcus nunes marcus nunes
    27. July 2010 at 03:50

    Post by Tom Duy on “structural unemployment”.

  11. Gravatar of scott sumner scott sumner
    27. July 2010 at 04:25

    D. Watson, That surprises me, it works for me now.

    Lee, I agree, first solve the monetary problem, then see where we are.

    Lorenzo, I haven’t seen The Princess Bride, so that reference went over my head.

    Luis, See response from Bill below.

    Thanks marcus, I agree with Duy that the main problem is insufficient AD.

  12. Gravatar of Lorenzo from Oz Lorenzo from Oz
    28. July 2010 at 03:52

    If you haven’t seen The Princess Bride, then you need to have a family night with your daughter and watch it. Seriously, it is one of the great romantic comedies with a terrific cast, memorable cameos and great lines. (References to it turn up all over SF and other literature.)

  13. Gravatar of scott sumner scott sumner
    28. July 2010 at 08:01

    Lorenzo, Thanks, I’ll try to watch it with my daughter.

  14. Gravatar of Robert Robert
    4. August 2010 at 17:20

    Long-term, structural unemployment is real and is here to stay. Even those economists who are beginning to recognize the problem vastly underestimate the ultimate impact. It is not just about a “skill mismatch.” It is ultimately going to be about a total lack of demand for skills (and workers). It is something unprecidented and it is caused by advancing technology. And ,no, it is NOT the same thing that has been going on for decades. Technology is moving faster and faster. In the next couple of decades will will see a staggering level of progress.

    For an excellent overview of this problem, check out this book (available as a free PDF): The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. http://www.thelightsinthetunnel.com).

    If there were a textbook on this issue of technological unemployment and where it will lead, this book is it. I wish every economist would take a break from data analysis and READ THIS BOOK.

    The author also has a blog at http://econfuture.wordpress.com

  15. Gravatar of ssumner ssumner
    6. August 2010 at 06:39

    Robert, I see no evidence that technology is moving faster and faster—indeed the fastest change was 1890 to 1960. And even if it was, it wouldn’t cause unemployment. It would cause faster growth in real output. You are using the lump of labor fallacy.

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