Monday, March 05, 2007

Flexible labor markets are best

On Feb 25, Louis Uchitelle's NY Times column ("Job Security, Too May Have a Happy Medium"; gated) compared U.S., Euro Zone and Japan GDP growth rates for the last decade, last 5 years, last 3 years and last year. The text of the column (recent growth rate differences are "minor" so why not go for European labor policies?) had little to do with the data shown. Annual U.S. GDP growth for the last decade was 3.2%, for the last 5 years 3.0%, for the last 3 years 3.2% and for last year 3.0%.

Byond outperforming the Japanese and Europeans, the U.S. economy endured a recession, a terrorist attack, a tech bust, a housing almost-bust, an oil shock and a war. Where are these in the numbers cited? There is amazing resilience in the U.S. economy.

A related point is made by Clair Brown, John Haltiwanger and Julia Lane in Economic Turbulence: Is a Volatile Economy Good for America? In short, Joseph Schumpeter had a better handle on modern capitalism than Lou Dobbs, Pat Buchanan, Ross Perot -- and many others.

The book is data-rich and makes its points the old fashioned way, by carefully processing large data files and laying out quite a few measured conclusions.