As soon as I
see the words Jeffrey and Sachs (director of the Earth Institute at Columbia
University) I expect to read rubbish.
In today’s
Financial Times he claims
that stimulus packages have failed, but that new technology will bring economic
growth.
Well the
idea that new technology brings growth is not exactly the revelation of the
century. Mentally retarded ten year olds have worked that out.
But that
leaves the question as to whether new technology raises numbers employed, and
that’s more complicated. Employment may rise or it may not depending on a
number of factors listed below.
Certainly
the bog standard Luddite argument that machinery puts people out of work and
raises unemployment is unlikely to transpire (though that’s a possibility).
A cut in the
real cost of making stuff equals a rise in the real value of money: in particular
a rise in the real value of what MMTers call “private sector net financial
assets”. That’s the national debt plus monetary base. And that rise ought to
encourage extra spending.
On the other
hand the latter rise also means a rise in the real value of debts. I.e. debtors
become worse off and creditors are better off. And debtors’ spending is more
sensitive to changes in their net worth and income than that of creditors. So
that effect tends to REDUCE aggregate spending when technological improvements
come on stream.
Hopefully by
now you’ll have tumbled to the fact that the aggregate employment effects of
technological improvements are far from clear. Thus Jeffrey Sachs’s implicit
assumption that those improvements will raise aggregate employment is nonsense.
No comments:
Post a Comment
Post a comment.