By Arnold Kling
The Economist asks about it. Paul Seabright answers:
this recession, more than most, seems likely to have produced a great increase in the mismatch, due to the unsustainable patterns of consumption and investment induced by the credit boom that preceded the financial crisis. It’s as though the passengers on the rail network need a whole new pattern of travel to different combinations of destinations, for which the connections are no longer optimised and for which there are too many trains in some directions and too few in others.
Daron Acemoglu suggests that what we are seeing is a speed-up of a trend away from low-skill manufacturing jobs. There is much to chew on in this discussion, and the question of what to do about structural unemployment requires a lot more thought. Thoma’s answer strikes me as a bit too vague, although I am sure he could flesh it out.
I just want to mention a question that came up in the comments on my post on recalculation. What is a sustainable pattern of production and trade? A sustainable pattern is where comparative advantage is utilized. So, if we both eat carrots and potatoes, and I live in a region that has better land for growing carrots, then for me to produce lots of carrots and trade them to you for potatoes is a sustainable pattern of production and trade. If I instead grow mostly potatoes, I will not be successful as a farmer. Thus, a sustainable pattern is one in which comparative advantage is realized. An unsustainable pattern is one in which comparative advantage is not realized, presumably because people are deceived for a while about the costs of their enterprises.