Malinvestment in Human Capital (thinkmarkets.wordpress.com)
- Highlight Loc. 9-13 | Added on Sunday, December 11, 2011, 07:12 PM
Malinvestment in labor markets is the counterpart to malinvestment in capital goods. Higher education is a bubble, and colleges churn out graduates with degrees that have no application in the workplace. Student borrowing to acquire such degrees is malinvestment in the same way that constructions loans to build homes in Las Vegas was malinvestment. There is no mechanism by which lowering interest rates (“monetary stimulus”) or spending money on public workers (“fiscal stimulus”) is going to cure the problem. Labor mismatch is a manifestation of a coordination failure, just as malinvestment in capital goods is a manifestation of a coordination failure. It is a microeconomic problem.
