I don’t think I am. I’m arguing that profound structural unemployment is a condition that characterizes recessions/corrections, that it is closely tied to the concept of malinvestment, and that your notion of structural unemployment is way too narrow (which is why I continuously refer to Garrison’s argument).
Garrison asks,
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Do you understand why this is relevant? Structural unemployment extends far beyond technological innovation (creative destruction), and one shouldn’t conflate it with frictional unemployment. The real-estate agent that lost his/her job due to the massive contraction in the residential real-estate market is structurally unemployed, the same way that the horseshoe producer was structurally unemployed in the 20s due to the introduction of the automobile. And the same is true for the recent college graduate with a finance degree that can’t find a job due to the contraction in the financial services industry, the construction worker who can’t find a job due to the contraction in residential and commercial real-estate, etc.
This type of unemployment, this relative disproportionaly, is extremely profound today. Again, and this is my key point, the problem is not that “there aren’t enough jobs,” but rather that people have become accustomed to certain wages and have specialized/gained experience in jobs that no longer exist (either at all, or to a sufficient degree) and they’re not willing to work for $8/hour at the local McDonalds/Wal-Mart (though recent data suggests that this is changing, and that individuals are accepting much lower wages).
But Krugman does not agree. He argues that the problem is not that there’s relative demand deficiencies and/or structural imbalances (referring to the structure of production), but rather that there is a general demand deficiency, which is causing disinvestment in all industries, and therefore reducing general productivity across the board. He makes the typical Keynesian argument, which blames insufficient aggregate demand. But this argument simply does not correspond to the facts, as the OP pointed out.
Now if the problem really was a lack of general productivity, then the best way to remedy it is to increase investment (capital accumulation) which you can easily do through government expenditures and by reducing the rate of interest to zero. But again, this prescription is inappropriate because the problem is not really a lack of general productivity (though it does exist to some degree); the problem is that there was too much investment in some industries, and too little investment in others (which is why a readjustment process, rather than an expansionary process, is essential).
Thus:
- Krugman’s analysis is not consistent with the Austrian framework
- The OP had the correct interpretation of Krugman’s arguments
- The problem is not really one of deficient general productivity, though it does exist to some degree
- Many of those unemployed today are structurally unemployed
Do you agree with this? We’re in full agreement if you do.