Are we in a great stagnation?

myp said:

First off, let's not distort what Cowen says. He is not saying there is a tech cycle and I don't know his exact position on natural unemployment. Most of the points I am arguing here are mine, although I am citing Cowen's suggestions in terms of a stagnation as a possible reality.

That being said, the US has been outside your 4-7% range several times including before the Fed was even made, during the Depression, the 70s, the 80s, and this decade among others.

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"Rangebound" does not mean that there can't be instances of the rate spiking out in one direction or the other. It means that most of the time, the rate is to be found within the range. And if you look at historical charts of the unemployment rate, yes, it does break out higher than 7% here and there, but it quickly comes back down. The exceptions to this have been the Great Depressions I and II, which were immediately preceded by credit booms.

This would suggest that the forces causing un/employment are relatively stable over time, once you remove the effect of the credit cycle. (Or do you dispute credit cycle theories?)

myp said:

Now let me pose you a question. Do you think a civilization in the desert where it literally had no natural resources would have a harder time at growth and innovation than the same people in a place with many resources like the US?

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Of course they would have a harder time. But we are not a civilization in the desert, we have the resources of the United States.

Malthusian arguments have been made again and again throughout history, and they have always been dismissed, as we have always found new gains in productivity stemming from technological progress. Why should this time be any different?

myp said:

Of course credit can affect the rate, but even without a Fed you would have those issues (arguably moreso) as we saw before 1913. I think we agree on that though. What we don't agree (if I am understanding you correctly) on is whether other things (aside from government) can cause unemployment outside of what is natural. I think my point below will apply here too if this is the case:

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No, I don't think that lack of resources has anything to do with unemployment.

Even if we were a civilization in the desert, that does not mean that there wouldn't be work to do. If anything, it would mean that there is more work to do. The availability of natural resources does not influence employment, it only influences the amount of tangible reward we get from doing work. It would mean that we have to put in more hours of work to get each additional unit of reward, but it would not prevent us from doing that work in the first place.

I believe unemployment comes from within the economy itself. It's a result of firms' inability to finance growth.

myp said:

So you think that a resource abundant country has the same growth prospects in terms of employment as one with absolutely no resources? Do you not believe in comparative advantage then?

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Yes and no. D)

Yes, I do believe that in terms of employment, resources do not matter. "The economy" is just a bunch of people engaged in currency-facilitated trade. The availability (or lack) of resources does not preclude anyone from doing work, and does not preclude them from making a profit in nominal terms. A dearth of resources will simply mean that it is harder for a people to transform labor into real product.

In other words, the resource-starved economy will have a lower marginal productivity of labor, in real terms. But, as we have seen in our actual economy, employment rates have been mostly stable over a great range of marginal productivity values. (As marginal productivity has been increasing exponentially for as long as we've been paying attention, and employment has remained mostly stable.)

And no, I do not not believe in comparative advantage. The resource-rich economy obviously has an advantage. If two countries were to begin trading with each other, one with abundant resources and the other lacking, the currency of the resource-rich country would be more valuable. (As the same product would fetch a higher price in the resource-starved economy.)

Imports would be cheaper for the starved country, and it would eventually build up a crushing trade imbalance. Also, capital flows into the richer country would be encouraged, reflecting the greater opportunity in the richer country. Eventually, these factors would build up to the collapse of the starved country's economy and currency, unless they can find something that they have an advantage at producing. (Intellectual capital, perhaps.)

So, essentially, resource unavailability is important, but it cannot explain our current economic problems.