"System change is now inevitable. Either because we do something about it, or because we will be hit by climate change. '...

"We need to develop economic models that are fit for purpose. The current economic frameworks, the ones that dominate our governments, these frameworks... the current economic frameworks, the neoclassical, the market frameworks, can deal with small changes. It can tell you the difference, if a sock company puts up the price of socks, what the demand for socks will be. It cannot tell you about the sorts of system level changes we are talking about here. We would not use an understanding of laminar flow in fluid dynamics to understand turbulent flow. So why is it we are using marginal economics, small incremental change economics, to understand system level changes?"

Wednesday, June 15, 2011

The Intractability of the US Unemployment Problem

If the problem is construed as getting back to employment levels of the past, it's probably not solvable by any means in the short run.

Some more graphics to make the point:

GDP and GDP growth:


Correlation of oil prices and recessions:




US employment impacts of various recessions:



Total US employment (http://delong.typepad.com/):



Now consider the relatively healthy 2005-2007 economy as representative of baseline employment growth rate.

Upshot: this number is not going anywhere anytime soon, no matter who or what you choose to blame.

1 comment:

Pangolin said...

If only there were some way to decouple employment from petroleum use........