Karl Smith Tells "Austrians" and "Structuralists" About Wesley Clair Mitchell (1913) Business Cycles
One reason that I have long been inoculated against "Austrian" and "Structuralist" error was that back in 1983 I read Wesley Clair Mitchell's (1913) Business Cycles, and later Burns and Mitchell: Business Cycles: The Problem and Its Setting. They piled up mounds and mounds of data that showed quite convincingly that the business cycle was not a shift from declining to rising sectors or a shortening of the period of production, but rather an economy-wide pulse to the intensity of economic activity.
Karl Smith attempts the same task as Mitchell in a single blog post:
[T]here is a tendency among structuralists and Austrians to complain that Keynesians only look at aggregate data and draw sweeping conclusions, but then the structuralists and Austrians fail to examine the disaggregated data…. If the sector level is of interest to you then we have lots of sector data at our finger tips. If that’s not enough the Economic Census lets us dig down to a level of aggregation that is only roughly 3 firms deep…. Right now there are questions about the jobs. Is there such a thing as “the labor market” or are there simply lots of markets in which labor is bought and sold.
I think there is a labor market… here are two very different sectors and their job opening rates. Openings as a percentage of employment overtime. Even though the difference between sectors is at least as big as the difference in sectors, the key is that they move together…
Now we do have structural shifts. As I have said before, between 2005 and 2007 the U.S. economy shifted out of construction and into exports:
But the downturn begins not when the market economy tries to shift resources from construction to exports, but rather when the financial crisis disrupts everything.