the present generation has become more self-centered than its predecessors, it will be difficult for policy to make much headway in achieving this objective.
Media Illustrations
Example 1
Economist McKenzie attacks both American political parties' attraction to what he calls "jobilism" trying to create jobs mostly by protecting current jobs, thence reducing churn.
What is churn in this context?
Churn is another term for creative destruction. It refers to the turnover of jobs elimination of jobs that have become obsolete because of technical advances and their replacement with new jobs in areas meeting new demands for goods and services and incorporating new technology. An example might be the invention of the automobile requiring the elimination of jobs in the buggy industry and creation of jobs in the automobile industry.
Why would reducing churn be viewed as undesirable?
It is churn that causes productivity to improve.
What implications does this comment have for one's view of the North American Free Trade Agreement?
One would have to recognize that this agreement would require the loss of many jobs offset by the creation of many new jobs as our economy specializes in what it does best, thereby improving our overall productivity.
Example 2
Lipsey points to evidence that when demand is held too long below capacity output, "capacity itself may shrink (at least relative to the potential labor force) with disastrous consequences for the inflation-unemployment trade-off." This means that successive demand-induced recessions compound the problem and lead to ever increasing levels of inflation and unemployment.
How and why would capacity shrink?
If demand is below capacity output, there is idle capital stock and thus no incentive for new investment. Over time the existing capital stock wears out and becomes obsolete. This depreciation of the existing capital stock shrinks capacity.
Why is the caveat "at least relative to the potential labor force" added?
The labor force continuously grows as population grows. This growing labor force requires a growing capital stock to work with. It is not enough for the capital stock to remain unchanged or to grow slightly it must grow by enough to match the growth in the labor force.
