But I’d also like to stress a related point. Brad doesn’t actually fall into this fallacy, but you often find people writing about the Great Recession and subsequent Lesser Depression as if they were largely about trying to find a place for all the people formerly employed in construction. And the fact is that this just isn’t right. As Larry Mishel shows, the unemployment rate would be almost as high as it is even if we ignore everyone in or formerly in construction.
This was much the subject of my much talked about – primarily by me – presentation at GMU were I attempted to “Address Austrian Economics on Its Own Terms”
The basic story is one of misallocation of resources, but you can slice the resource picture dozens of ways and not get anything that could plausiable be called mal-investment.
You can see this in part by the fact that the price of houses didn’t even rise that much. The price of land rose. Further, renovations are hitting record highs even as new construction is hitting record lows. This story is all about land as the option value and collateral value of land – not fungible real resources.
In anycase I would present my slides had someone – who will remain nameless thought not photoless – maliciously and with dastardly wicked and boundlessly evil aforethought destroyed my data files.
First of all I think there is this chart which should but this baby to bed Yes, those little blue dots you see are residential constructions contribution to payroll growth
And even still the timing is wrong
The peaks and troughs are different and the recovery is fundamentally different.
Residential construction is an import story about the last 8 years of the US economy but it is by no means the story of the Great Recession.
The condusion I believe comes from a rampant inflation of price and output.