Tuesday, August 28, 2012

Rubs from Raghu Rajan

Raghu Rajan really rubbed me the wrong way - not that I’d ever want him to rub me at all.

In a direct jab at Keynesian stimulus spending:
Rather than attempting to return to their artificially inflated GDP numbers from before the crisis, governments need to address the underlying flaws in their economies. In the United States, that means educating or retraining the workers who are falling behind, encouraging entrepreneurship and innovation, and harnessing the power of the financial sector to do good while preventing it from going off track.

Nothing really surprising or even controversial here - except the appeal to education as the apparent solution to the underlying structural problems. Haven’t we been down this road before? I forget.

Here is more:
With the aid of technology and capital, one skilled worker can displace many unskilled workers. Think of it this way: when factories used mechanical lathes, university-educated Joe and high-school-educated Moe were no different and earned similar paychecks. But when factories upgraded to computerized lathes, not only was Joe more useful; Moe was no longer needed.

But does Joe really want to work at a factory?

Consider how computerized retailing has become - point-of-sale, just-in-time-inventory, customer relationship management. Is Joe really more productive than Moe? Yet, all the Moes who work in retail are considered over-qualified by some economists:

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