Tyler Cowen has a piece in the New York Times today. He’s arguing that fundamental weaknesses and dysfunctions may be causing permanent changes, a reset:
The debate over the economy these days isn’t just about income inequality and what should or should not be done about it. Perhaps the most crucial issue is whether economies will return to normal conditions of steady growth, or whether we are witnessing a fundamental transformation, unveiled in bits and pieces. Nominations for the nature of that transformation include a “robot economy,” a new political economy where elites have too much power or, perhaps, a new global economy where the United States no longer holds such a dominant position, to the detriment of American firms and workers.
I think Cowen’s argument is consistent with the analysis that Arnold Kling calls Patterns of Sustainable Specialization and Trade (PSST). This form of analysis examines firm’s, individual’s, and institutions’s skill sets or expertise (patterns of specialization and Trade) and how they adapt, or fail to adapt to change (Sustainability). Here’s his very readable paper on PSST.
In this view, the world is changing faster than we can change our patterns of specialization and trade. It leads to slower economic growth and persistent unemployment.
(Originally published 5-17-2015 in my personal blog)