Friday, September 17, 2004

Last week Alan Greenspan had his regular meeting with the congress to report about the fed. An interesting thing conspired during the meeting. Greenspan found himself being asked about job growth -- some congressmen and women wanted to know why growth has been slower during the Bush adminsration.

My guess is that his response was not what they were looking for: his answer was that slow job growth was due to productivity growth. Yep, that's right. Productivity is up -- job growth slows. How so? It takes less people to make more products so less people are hired. This is an interesting paradox. We have excelled at productivity -- US productivity always has been pretty amazing.

So, how do we fix the slow job growth. One approach is to do things that slow productivity so more workers are needed. Of course in that case the economy of scale will pick up. The result? More jobs but LESS PAY PER JOB.

The other answer to is create an environment where more businesses are started in new areas. More businesses in new areas mean more sustainable jobs. The key is releasing cheap capital into the marketplace so this can take place.


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