Tuesday, June 4, 2013

Just a chart...

Check this out:

You teach your 16 and 17 year old high school kids the costs of unemployment:
...that it's a terrible waste, since resources are limited and wants are unlimited...
(...right after you've explained the 'fundamental' economic problem that necessitates 'choice' and blah-blah, blah)

...that it implies 'output lost forever' with the economy producing inside its production possibilities...

...that it entails other huge economic, personal and social costs 

...and, of course, they realize that the concept is thus pretty much absurd....

Then you got to go ahead and teach (IB syllabus) the Monetarist/New Classical view but without the 'elegance' (for many) and numbing effect of the math models involved...

...which means that you have to hit them directly in the face with the...

 '...but in the long run, they assume that money wages are flexible and fully adjust so that the real wage rate is restored and the economy will return to its natural / normal rate of unemployment and thus to potential output'.

Hey, what about 'when'?
How about how how much money wages fall (is, say, a 20% cut ok, or is it not enough to restore competitiveness??  Would, say, a 50% cut be perhaps better?)

Hey, what about these numbers (from the chart above) on the extent of youth unemployment? 

Are we serious?  

How far should money wages fall for labor markets to clear?  
Who decides how much they fall?  The impersonal market?
What are the implications of these figures for the stock of human capital of these countries?  
Will a 23 year old be able to make a living?  To have get married and raise kids?  To buy a house or a car?  

What about the demographics and pensions in 10 or 20 years if the best and the brightest leave the country?

A Krugman post followed by a Coppola Comment by Frances Coppola got me going.

The original posts are better.

Go to the Krugman post  here

Go to the Coppola post here

And copying from the last one:
CEO of Berlin Stock Exchange Artur Fischer has told #newsnight most jobs will not be available in Greece, Greeks need to leave the country...
So that Mani, Paros, Sifnos, Zagorohoria, Skopelos, Karpathos, Kythera, Tzia, Kefalonia, Pilio etc etc are all sold to ___________________ retirees (fill in the blank...).

And, what was it about institutional frameworks?  Did someone say extractive?

I am so worried about my/our children.