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Sticky wages and the environment

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Nadjeschda posted on Sun, Nov 21 2010 7:27 AM

This is a "look for holes in my reasoning" post again.  It is not meant to solve environmental problems by crashing the economy.

In an economic downturn, economic activity decreases which should allow the environment to regenerate. Land which was over-farmed lies idle, air pollution reduces, fish trawlers stay in the port.  

If you now restart the activities your productivity per hour is higher: there are now more fish in the ocean, the land is more fertile/requires less investment in erosion control,  workers are less often ill due to reduced air pollution.

Even if wages are sticky shouldn’t increases in per-hour productivity be enough to re-employ workers who where laid of and hence end the crisis?

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You're listing sections of the economy that have been over regulated for years. Farming has been subsidized for years due to an over expansion during WWI and overfishing occurs because no one owns the ocean or fish swarms. I would say that for there to be productivity there would need to be many more changes. Remember, its about allowing the economy the restructure itself into a productive economy not reinflating the economy to the way it was before the crash.

"In a modern democracy, no matter whom you vote for, the government always gets elected" -Christopher Westley

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Azure replied on Sun, Nov 21 2010 8:24 AM

This makes the assumption that production is purely subtractive on the physical resources on which it relies, which is dead wrong. If a piece of farmland is left untouched and starts to become overgrown, that land is now LESS productive, not more, and now capital has to be re-invested into making it productive again.

Your thinking somewhat holds for industries which are subtractive like fishing, but they only are so because of the state. It's far more efficient to invest capital into things to get a higher return rather than rely solely on what nature provides, but this can only be done if property rights are respected.

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My main critic to myself would be that the industries listed by me contribute not much to GDP and hence would maybe not be enough to relight the economy.

Many but not all farmland can indeed regain their fertility if they are left untouched for a while -that depends on the soil. Soils which have problems with erosion, salination or low organic matter content can regenerate themselves. You might all solve those problems by input of labour and other investment, but if labour input is the main way out here than I guess the per hour productivity declines in contrast to a field which regenerates itself.

I don't talk of the perfect economy which you might want to set up but the economy we now have, state interference and all. I just look out if the concept of "sticky wages" has any sense in that world.

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I foresee a misunderstanding, if you invest in a farm the per-hectar productivity will likely go up, but this does not becessarily mean that the per-hour productivity goes up.

All industrys which use organic materials are substractive. The difference between farming and fishing is that the former is an intensive use of the ecosystem while the later is extensive one. If we would farm the ocean intensive I am sure that per-hectar productivity would not only rise but jump.

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