Afternoon Must-Read: Larry Summers: No, a One Commodity Model Is Not Adequate

Tim Taylor sends us to:

Larry Summers: “Until a few years ago, I didn’t think this was a very complicated subject: The Luddites were wrong and the believers in technology and technological progress were right.

I’m not so completely certain now…. In the United States today a higher fraction of the workforce receives disability insurance than does production work in manufacturing…. The extent to which differential productivity growth characterizes our economy is, I think, sometimes underappreciated. The Bureau of Labor Statistics normalizes the consumer price indices at 100 in the period 1982 to 1984…. Television sets at five stand out. That is obviously a reflection of a rather energetic hedonic effort by the Bureau of Labor Statistics. One suspects that equally energetic hedonic efforts are not applied to every consumer price. But nonetheless, the simple fact is that the relative price of toys and a college education has changed by a factor of ten in a generation. The relative price of durable goods or clothing as a category and all goods has changed by a factor of almost two in a generation. This table provides a somewhat different perspective on the common and valid observation that real wages have stagnated in the United States. The observation that real wages are stagnant reflects wages measured in terms of the overall consumer price index. But this obscures the truth that real wages measured in terms of different goods have behaved very differently…