Arnold Kling files this under the myth of the macroeconomy, which confuses me. I think it’s a very important point but its not immediately clear why its makes a myth of macro notions.
I quote Arnold, quoting Bryan Arthur:
Physical jobs are disappearing into the second economy, and I believe this effect is dwarfing the much more publicized effect of jobs disappearing to places like India and China.
the main challenge of the economy is shifting from producing prosperity to distributing prosperity. The second economy will produce wealth no matter what we do; distributing that wealth has become the main problem. For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking–fewer of us in the future may have white-collar business process jobs–and we face a problem.
This phrases well one of the points I have been trying to make. I don’t think jobs are solely about wealth distribution but that is a lot of what’s going on.
And, when people say “the economy is bad” they do not mean to suggest we have a problem producing prosperity. They mean to suggest we have a problem distributing prosperity.
This is why it can be the case that Net Worth, Consumption, Output, the Size of the Capital Stock, etc, are all higher now than in 1998 but in 1998 the economy was good but now it is bad.
Its also why suggesting that government interference would mean “zero unemployment but nothing to eat” falls on deaf ears today. We have no shortage of prosperity.
That people can see goods and services in the shop window but have no money to buy them is the classic failure of capitalism. That people have money but there are no goods in the shop window is the classic failure of socialism.
Not to be too simplistic but our current problem looks more like the first than the second.