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Monday, October 15, 2007

US Productivity Slowing

People like Paul Graham are big fans of inequality. Reading his essays, one feels like if we could only return to the levels of inequality found in the gilded age (or in India or Argentina or Brazil of today), productivity would improve dramatically and we'll generate more wealth than ever before.

Modern economics research, however, gives the lie to this sort of right wing propaganda. (Modern happiness studies too, show that countries where the Gini coefficient is low are happier societies)

Even worse: The productivity numbers are likely even worse than they look. The most important reason is that the official productivity figures don't handle the rapid depreciation of new technology very well.

As Paul Krugman writes in his latest blog entry, you have to squint to spot the so-called lagging of the European socialist economies with respect to U.S. productivity.

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