From his blog post, "My Opinion of Labor Search Theory":
The big problem with search theory is that it assumes that jobs are given. The PSST story is that in order to create a job, you need to discover some sustainable pattern of comparative advantage.
I do not put much stock in the story of unemployment workers wandering around, lost, unable to find the jobs that are sitting out there. I put my emphasis on a story of entrepreneurs trying to figure out what sorts of profitable business enterprises can be assembled using the resources available, including the stock of unemployed workers. Nowadays, it’s hard to put together profitable enterprises with low-skilled workers, because you have to cover payroll taxes and health care costs, provide enough take-home pay to make it worth their while to forego government benefits, and compete with other businesses that can hold down costs through automation and/or outsourcing.
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