New reasearch on productivity and recessions

Kahn and Kressel report their findings. HT Milton Recht

Bottom line, when get growth, sometimes exuberant growth, when productivity increases. When productivity declines, after some lag, the economy tanks. Basically. Their model seems to fit the housing market.

So the question is, why did productivity stop growing? My answer, accoding the to the whole point of this blog, is that productivity does not have a driver's license, so productivity advancements stopped at the roadside. We are in a recession because of the failure of the DOT to make the case for more automation on our roads.

Krugman nailed it in May 2008.