All these things work both ways. A recession/depression also increases productivity. I wrote about this in The Pathology of the US Economy. Alex Field later wrote how total factor productivity rose faster during the Depression years than every before or after.
Downturns make firms search harder for better methods of production -- over and above sweating labor. One the downturn eliminates old and obsolete capital, the way is set for new investment. By the way, the absence of a downturn may explain why the Verdoorn theory stopped working as well around 1970. On Mon, Sep 24, 2007 at 04:45:33PM -0700, raghu wrote: > On 9/23/07, Anthony D'Costa <[EMAIL PROTECTED]> wrote: > > Increased demand allows economies of scale and scope and thus a fall in > > costs, thus increasing productivity. > > > > That's yet another dependence: productivity gain through scale rather > than new technology. In this case maybe it is safe to say employment > effects will be positive? > -raghu. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com
