The "Productivity Puzzle" & Intangible Capital

[alice wellintown]

The Headline Economics would have us believe that the business cycle
is dead; we have a "new normal" and so on....but we don't. Itz not
"different this time".

 So why the record profits in the US, after huge gains in
productivity, with a loss of wage gains? Well....we might consider why
things are different elsewhere. Like,  in Englland. We might also use
some common sense. Are you going to tell your daughter or son, your
grand-daughter or grand-son, whomever, to forget about college? I hope
not. It would be a big mistake. College, like housing, is not an
investment. WE need to stop thinking about everything interms of
investment values. College grads have better lives. Period. Itz worth
the cost, in dollars and in time and in effort.

The Headline economists keep talking about the 1%, but what if they
talked about the 2, 3, 4, 5%? Would most of these be college
graduates? Isn't the real earnings gap between those who have aq
college degree and thos who don't? Sure it is. And isn't this the gap
that is widening? Of course it is. Why? Because jobs that don't
require an education are off shored and outsourced to cheaper workers.
So, don't get a job, son. Get an education, and then get a job. But
what about Occupy Guy? He got an education and...yeah....had bad luck
as he graduiated into a finacial crisis that caused a huge recession.
He should return to school because his value is sinking fast. But what
about all those loans? Take another one. Money is cheap and the
government will delay and pay your loans while you get more education.

Look, it ain't heaven, it just feels like that sometimes....


THE economy is in a bad way. Exports are sinking, the cost of bank
credit is rising, the state is cutting back and businesses anxious
about the fate of the euro are postponing investment. Yet the job
market has been remarkably resilient.

For an antidote to productivity pessimism, Britons might look across
the Atlantic. The response to soggy demand in America has been not
weak productivity but job losses. The share of working-age people in
employment has fallen by more (and remains lower) than in Britain. The
crisis has done no obvious damage to the potency of American workers.
But it has left a bigger share of them without jobs.

http://www.economist.com/node/21557779

Prior to the mid-1980s, labor productivity growth was a useful
barometer of the U.S. economy’s perfor-
mance: it was low when the economy was depressed and high when it was
booming. Since then, labor
productivity has become significantly less procyclical. In the recent
downturn of 2008–2009, labor produc-
tivity actually rose as GDP plummeted. These facts have motivated the
development of new business cycle
theories because the conventional view is that they are inconsistent
with existing business cycle theory.
In this paper, we analyze recent events with existing theory and find
that the labor productivity puzzle
is much less of a puzzle than previously thought. In light of these
findings, we argue that policy agendas
arising from new untested theories should be disregarded.

http://www.minneapolisfed.org/research/wp/wp694.pdf