Re:How Depressions Work
by parenthesis on Wednesday February 04, 2009 @05:43PM
(#466668)
redeployment takes time
Those who have lost their jobs don't necessarily have the right skills for the more economically productive jobs that hopefully get created. Also, they don't necessarily live in the right places.
Not to mention that many who are in the right place and could profitably use new people are not sure of that fact, so they lack the confidence to bring in as many new people as they might otherwise.
Re:How Depressions Work
by jorgeortiz85 on Wednesday February 04, 2009 @05:51PM
(#466681)
Which is why fiscal stimulus is temporary. It's necessary while the economy is at less than full employment, but once the economy starts picking up fiscal stimulus should drop off.
That's the cover story. But how much of the $819 billion in the stimulus bill is set to automatically expire in 2 years, or when the economy reaches certain growth targets? Roughly: none. A lot of the spending won't even get flowing until 2010 or 2011, when the economy may be recovering just fine on its own.
But now you've left the argument about whether fiscal intervention is productive, and embarked instead on an argument about politics.
Theoretically, prompt fiscal intervention could temporarily fund productive projects for timely general economic benefit.
Practically, politics means fiscal intervention arrives late, stays too long, and is targeted to reward favored groups and centralize power.
There's no separating the two without a magic wand to implement benevolent stimulus without a political process.
Yes, but redeployment takes time -- especially when everyone looks around and sees all their assumptions about what profits different activities will return are wrong, and need to be recalibrated. That research -- which happens tentatively, experimentally at first -- means some capital/labor sits on the sidelines while the necessary information is collected or created.
Redeploying labor immediately at the first things you can think of might keep people busy but can worsen the wealth destruction, if those activities wind up being of net zero or negative benefit. (By tying up workers on make-work, they could also slow the rediscovery and restaffing of valuable projects.)