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[pigou]

Economic policy isn't there to fix short-term problems. You can use fiscal or monetary stimulus as necessary, but the broader purpose is institutional: setting incentives, instituting/regulating markets, etc.  That doesn't fit into econ 101*, but that's what the long-term interest of the government ought to be. Short-term thinking is what lead to the abolishing of rules just because things were (seemingly) going well at the time. For what it's worth, more than one economist has predicted that this isn't a good idea. The fact that most haven't been out there lamenting about the housing bubble is simply because economists don't sit all day in front of screens following market data.

The US does need an educated workforce in the long run. We can never compete on wages with China, India, and a whole range of emerging economies. What we can compete on is decent institutions (they could be better), a strong justice system, reasonable political stability (this is becoming questionable given the Republican performance as of late), a safe currency (questionable for the same reason, not because of deficits), and a by and large qualified workforce.

If we lose that, the current recession might be one of the smaller problems that will hit us.

* Every intro textbook talks about supply and demand, which eventually reach equilibrium. None that I have come across says anything about how to design an institution that makes it happen efficiently - that almost seems to be reserved for graduate school. Yet, without a functioning market, the whole supply and demand thing sort of falls apart.

Economics is not a science because you have to accept ridiculous and untenable leaps to get from cause and effect in its models.

Troll somewhere else.

[mended_drum]

Could someone define "capitalist" for me here?  It clearly doesn't mean "someone who believes in capitalism," and if Ph.D.s, as implied upthread, can't be capitalists, then I'm not sure what it means.  Rich people?  Rich people who own a lot?  Run companies?

[csguy]

csguy- I'd just like to point out that my supposition was that only capitalists could produce enough jobs to get us out of the economic crater we are in.  I do understand the role that the government should play in creating some jobs to help us out of this jam, but it's only spending money it doesn't have. (I also understand that, in general, many many people work for one type of government or another, either directly or indirectly. But, again, same as it ever was.)  I believe that the $5 billion stimulus Obama is proposing for the community college sector, while heartwarming and perhaps just, will not actually amount to a hill of beans in terms of the economy.
... snip ...

Thanks for clarification.

I would see community college investment as a mid-range fix. Assuming we can persuade the capitalists to begin producing jobs there should be workers available with the skills to fill them. Assuming that we have trained these potential workers in the appropriate skills which is another tricky problem.

Perhaps we should argue that the government supporting jobs for the "idea creators" and those who educate them will produce the ideas needed to create the next big industry. This is because, of course, hiring me is always a good thing ;).

[methodsman]

Could someone define "capitalist" for me here?  It clearly doesn't mean "someone who believes in capitalism," and if Ph.D.s, as implied upthread, can't be capitalists, then I'm not sure what it means.  Rich people?  Rich people who own a lot?  Run companies?

mended_drum-basically, in my book, yes, yes and yes.  Capitalists are those with or access to capital who make decisions about what is to be made and sold from coffee to jet airplanes, from small business entrepreneurs to corporations.  Having a Ph.D. doesn't exclude one from being a capitalist or believing in capitalism, of course.  But, most highly educated people don't operate in that world.  They are mostly occupied with the world of ideas, some of which certainly fuels innovation in production  But, I don't think a Ph.D. came up with the Chia Pet.

Aside from government jobs already mentioned and a human service sector which kind of straddles both the public and private sectors (think private hospitals and prisons), most people work for capitalists/corporations.  They are the one's that dictate the material fate for most people in the entire world, both developed and undeveloped.  When they decide that the "business climate" is not "positive," they just stop putting their money to work.  In short, they have no incentive to innovate and create jobs because they are already rich.  The one exception are small business owners who are technically capitalists, but can't afford to stop what they are doing.  In their case, they just fire everyone but themselves and wait for an increase in business to restaff.

mm

[sibyl]

The thesis statement is vague.  "Higher education," "relevant," and "solving" are ambiguous in this context.  Do you mean that higher education can contribute no expertise or knowledge to addressing the crisis?  That kind of assertion seems gratuitously hostile.

Do you mean that higher education, as a sector of the economy, cannot generate enough economic activity to pull the economy out of the crisis?  Or do you perhaps mean that the crisis is a function of deep structural issues that are beyond the capacity of higher education institutions to address?  I'd agree with both of those propositions. 

Or do you mean that the current policy emphasis on education as a component of a jobs-training program is irrelevant to solving the economic crisis?  I would say that the policy angle is insufficient, but hardly irrelevant.   I don't know any economist or policy wonk who says that a better-educated workforce will CREATE jobs.  A better-educated workforce is better able to FILL the vacancies that already exist in various fields.  (There are plenty of jobs going begging in nursing, for example; they don't have to be created.)

Of course, the unexamined minor preposition is that retraining is sufficient to realign the workforce -- that the only thing standing between un- and underemployed workers and full employment is training, rather than, say, sufficient pay or mobility or desire.  (If you are a nurse living in Cincinnati and someone is offering you a job in Dayton, do you take it?  What about Louisville?  What abnout Wheeling?  If you have a PhD in English and are unemployed, would you want to be a nurse?)  That might be worth discussing.

[zharkov]

Could someone define "capitalist" for me here?  It clearly doesn't mean "someone who believes in capitalism," and if Ph.D.s, as implied upthread, can't be capitalists, then I'm not sure what it means.  Rich people?  Rich people who own a lot?  Run companies?

In Marxian economics, capitalists own the means of production, while the proles have only their labor to sell.  That vocabulary is not typically used in mainstream economics taught in the US. 

For what it's worth, I'm as willing to man the barricades as anyone, but the moment when that would or could make a difference is fading into history.  The next revolution has yet to be invented.

[methodsman]

And it won't be televised, either.
mm

[methodsman]

I may stand corrected on that last statement considering the coverage that the occupy wall street protests are getting.

Zharkov, this is for you:

http://www.palgrave-journals.com/eej/journal/v37/n3/full/eej20118a.html

mm

[87735501111]

Interesting thread.

I recently heard a convincing talk about how we're also less competitive because the US doesn't typically select winning companies to support (industries, sort of) due to free market rhetoric - i.e. "the market will sort things out" so to select winners and losers is inefficient. But in a global economy where countries routinely do this, and are successful, these national successes create both jobs and revenue. The market seems to have sorted us out into mostly finance, with a few winners in banking and a lot of underwater homeowners.

A related concern also echoes previous comments, in that with the flight of manufacturing abroad, we don't have that many reasonable jobs for people who are in the middle, the equivalent of semi-skilled manufacturing. Government and administrative jobs can absorb only so many people, and farming is mechanized, so what's left for average people? Call centers? Truck repair? It seems there are not a lot of good options for people that would be willing to work, but wouldn't have the means/desire/capacity to take on the risk of starting and running a small business. (The location choices point made earlier is also quite relevant here. We might think this is inefficient that people don't move to jobs, but you have to acknowledge sticky factors such as family.)

[methodsman]

I am not the first to say this, but not many people are, so it bears repeating: this country is in a death-spiral. Or rather, a particular and growing segment of the country is trapped in a death-spiral.  Its already agreed that there will be double digit unemployment for many years to come.  Foreclosures will continue to mount. There is an increasingly visible population of homeless everywhere.  Drug use and violence is spiking.  There is no way to educate ourselves out of this problem.  Jobs are needed for the average Joe and Jane now, but corporations have dismantled them and shipped them overseas. And the claim that the engine of the economy lies with small businesses is a total myth.  Corporations control everything and they don't care about the U.S. because they increasingly draw the majority of their profits from countries other than the U.S.

I may also not have been the first to say this, but I haven't heard it before so I'll say it and claim it as my own: any company whose HQ is in the US should take a vow (or be required) to draw at least 50% (I am being kind here) of its workforce from individuals residing in the U.S.  (I am not a student of the American labor market, so I will gladly unattribute that myself if corrected.)

mm