If we refer to what Civman was saying, the argument seemed to be that it was a political choice to train apparently excessive amounts of blacksmiths/engineers in the expectation that jobs would appear for them as a result. That would seem to make it a supply side problem. Which was his point as for as I can see. Current growth rates would seem to bear out his analysis, although I would say that the dominant political and economic paradigm is a stagnating factor he has not considered as a confounding variable. You could also point out that in reality there are not just unemployed engineers but everyone else as well... so the issue is one of general lack of demand, which could again be attributable to flaws in the prevailing wisdom putting friction in the way of potentially available growth.
The political explanation is insightful but but doesn't escape the logic-circle. What defines "excessive"? Why is aggregate supply not pushed out by the extra engineers? What are the physical limits preventing the financing of the extra engineers into more engineering work? Is there not more software to be coded? Are there not more bridges to be repaired? etc.
I know of two endogenous growth models, one by Paul Romer and one by Robert Lucas. Both model how the talent of labor effects growth. Romer was trying to pin down growth's x-factor, Lucas was trying to understand why capital flowed back to the core and not always to where labor is cheaper. i.e. why is economics 101 useless to explain growth (let alone wages, seriously).
Both demonstrate that growth comes from the development of your human resources. In Romer's model, every person you put towards ideas reduces current output but increases your rate of growth. In Lucas's model, you can only expect to grow your economy by doing steps that educate your workforce into what you're trying to grow into. You need to have your people learn each step that takes you from your populace's current expertise (say working simple machinery) to future expertise (complex, software based machinery, etc).
So you have 300 engineers unemployed. That's 300 people whose knowledge base is closer to the edges of human knowledge, so obviously if we don't want to put them toward production we put them towards advancing ideas, via entrepreneurship (which they would do on their own, they are engineers after all), science, or art, and all in all, new technology.
I'm interested in this too Hygro! So let me just answer on civman's behalf
... You said:
and the response was: I interpret that as him saying that the problem is the lack of money... "recession" as you put it. The 200 engineer "excess" is being caused by a lack of money to pay them... that lack being caused by the lack of "demand" for their engineering services... in turn caused by a lack of money to buy the things that you need engineers to develop... again the recession, right? So does the government borrowing money from the Fed Reserve to pay off the engineers' student loan debt also somehow create money to pay the engineers' salaries?
This demand model is the more compelling story, especially absent wage-depressing inflation. Your example demonstrates how that could work.
The Federal Government "borrows" in so far as it is just printing money that is legally called debt. The Jackson in your wallet is just a $20 promissory note, a legal device saying that the Federal Reserve
owes you $20. All money is debt, with different types of debt having different rules.
Federal student loans are a strange thing because its money printed for student loans, that get paid back with interest, which means money printed at the time of the loan and unprinted at the time of repayment. Why anyone thought it was smart to have the government run a tax surplus on students baffles me, because it's literally sucking money out of the economy forever.
You could indeed pay their student loans and they'd be freer to do whatever they felt, some more productively, some less.
But you could also just hire them, or adjust aggregate demand's conditions (taxes, spending) so that others hire them, or that they even hire themselves.
After thinking about it a little more, it seems like we either would have to:
1. Borrow the money to pay off the engineers' student loans and then borrow the money to pay them a low salary that was just high enough for them to do some participating in the service economy (through retail shopping) or;
2. Borrow the money to pay the engineers a high enough salary that they could simultaneously pay their own student loans and participate in the service economy.
There's no borrowing in the mortgage or credit card sense, but yes. It's more like reaching into your pocket of infinite money to close the money gap.
I think its a good question. I don't know if Hygro was trying say that it comes from the other engineers?
I was.
The interesting thing that struck me is that the multiplier effect and any Keynesian-inspired economics basically imply that money isn't and shouldn't be owned by anyone but should constantly be cycled to promote spending and economic growth.
If maximum economic output is the goal, then yeah.
)... I do want to see what Hygro has to say though, because I thought there was some argument on how paying the engineers student loans (or giving them 100% State funded degrees) would increase demand... Maybe I am mis-stating the position?
