The Forgotten Years (Part II)


Brad DeLong offers us another window into the forgotten years of the American economy, when resources pulled out of the residential construction sector were allocated into different sectors:

That’s how an economy is supposed to work. It’s not that no firms go bust, or no workers are laid off, or no sectors are declining. Rather, the idea is that some firms are failing while others are striving. People get laid off then they go get new jobs. And it was working until one day in 2008 when the export and business investment sectors that had been growing suddenly started declining as well.