As usual there is a lot more to say on this than I will get a chance to say, but I wanted to at least take a stab at this piece by Leonhardt before the body turned cold.

I pick it out in part because it’s a good expression of what I think is a popular error and in part because lots of folks have praised it, making it a good target for a contrarian post.

Leonhardt says

In recent years, on the other hand, the economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.

Its entirely possible for employment to grow while living standards fall. A quick and dirty measure of that comes from this widely circulated chart.

You might think all sorts of things about 2005, but do you feel like the economy was worse then than it was in 2008 – 2009, because median household income was lower.

Not only that but as you can see there is a rough correlation between median household income and the unemployment rate. Higher median income, the higher unemployment.

There is a lot going on here – not least of which is that a growing economy as more jobs and higher gas prices – but the core point is that increasing value and increasing employment are not the same.

People keep mixing this up.

I emailed a fellow economists on this issue so maybe I will have a good jumping off point later in the day but look it:

Prices on the NASDAQ, for example, go up and they go down. That can be good or bad for you. But, the market clears. It doesn’t matter what happens in tech or to Pets.com or if we weren’t as wealthy as we though we were or all kinds of other junk. The market clears.

Why aren’t market’s clearing? This is the question? Why do I have houses piling up foresale? Why do I have workers filling out resume after resume? Why did I at the worst of the recession have inventories of real goods piling up at record rates? Why do I still have 2009 model year cars on my lots? Why do I have assembly lines that are not turning?

Why aren’t my markets clearing?

We lose a bunch of wealth fine. We got the balance sheets wrong fine. There is no new tech fine. There is not enough oil fine. All fine, whatever.

Why aren’t my markets clearing?

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