Don’t think of it as a technology shock but a productivity shock.
So anything unanticipated that negatively effects productivity will be thrown into the term.
Can someone please explain to me wtf a negative shock on technology is?
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The income identity
Y = W+P
can mathematically be transformed into
dlog(y) = [a*dlog(w)+(1-a)*dlog(p)]+a*dlog(L)+(1-a)*dlog(K)
w and p are relativ factor income/costs, a is labor share.
The term in the square brackets is your „TFP“, as measured with nipa/sna data. .Why the two „no goods“? You want to argue against math and sna definitions? Or are you dumb enough to believe that you are actually dealing with an aggregate production function? Popper would lol if he knew the story about Solow vs Shaikh and the humbug production function. Hilarious!
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as more or less said above
1) it can be wrt a trend, not in absolute terms
2) in absolute terms, I wouldn't be surprised if Facebook, twitter, etc. actually lowered the average and total productivity of the population
3) the fall of Rome was perhaps an absolute negative shock both in terms of productivity and actual technology lost
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I know the supply curve has to shift inward if there is a negative shock. technology can't cause an inward shift. This is the usual bunk we get from straight jacket modern macro.
Part of the problem is language: by technology all they (e.g., Prescott) mean is the technology that transforms aggregate capital and labor into aggregate output. So an increase in misallocation (factors moving into bad firms) is a reduction in technology in his sense.
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I know the supply curve has to shift inward if there is a negative shock. technology can't cause an inward shift. This is the usual bunk we get from straight jacket modern macro.
Part of the problem is language: by technology all they (e.g., Prescott) mean is the technology that transforms aggregate capital and labor into aggregate output. So an increase in misallocation (factors moving into bad firms) is a reduction in technology in his sense.
In that case it's not really a technology? It has to be some long-term factor that cannot really predict cycles. It has to be some institutional, social or structural (in the neo-structuralist sense) variable. These are long-term issues and not really related to the business cycle.
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In growth accounting, TFP is a residual; i.e, the proportion of production that the model does not explain (endogenously). Thus, in terms of the model, a drop in TFP is puzzling, because it remains unexplained. Any interpretation of this drop that is not part of the model is, for not finding better words, b.s.
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I know the supply curve has to shift inward if there is a negative shock. technology can't cause an inward shift. This is the usual bunk we get from straight jacket modern macro.
Part of the problem is language: by technology all they (e.g., Prescott) mean is the technology that transforms aggregate capital and labor into aggregate output. So an increase in misallocation (factors moving into bad firms) is a reduction in technology in his sense.
In that case it's not really a technology? It has to be some long-term factor that cannot really predict cycles. It has to be some institutional, social or structural (in the neo-structuralist sense) variable. These are long-term issues and not really related to the business cycle.
What do you mean by "it"? Imagine all the banks crash and there is no credit. The only firms that can hire are those with a lot of cash (assuming some working capital constraint or something). Therefore a lot of factors go from good, cash-poor firms to bad, cash-rich firms. This can happen quickly, and is a "technology shock" in Prescott's definition of the term.