A friend recently referred to "the devaluation of American labor pool" as an explanation for what is happening in the American economy. I'm struck by the succinctness of the explanation. Yes, that explains a great deal of what is going on. Obviously, it does not apply to the entire labor pool. But it applies to well more than half of it.

I recommend you think about this at both a personal and societal policy level. We should get personal first. First get your emotional reaction right. My advice is to skip rapidly thru Elisabeth Kübler-Ross's 5 stages of grief: denial, anger, bargaining, depression, and acceptance. Get to acceptance as fast as you can. Accept that the American labor market of the 20th century is roadkill from globalization, automation, and rising natural resource costs.

Once you've reached acceptance you need to think about your career. Hey, don't want to think about your career? The acceptance stage involves a willingness to accept that your career is threatened. Take a long hard look at what you do for a living and ask how long your job is going to last. When does it get automated out of existence? Or hen does your skill set start becoming obsolete if you don't moderately or drastically update it?

Even if your job isn't going to disappear due to automation try to guess whether your pay will keep up with inflation. If it looks like demand for your labor is going to fall then you need to start looking for ways to learn new skills and pursue a strategy that'll insulate you from declining living standards. Accept the need for change. Accept the nee for you to change.

What should be done at a policy level? First off, keep in mind that even if you have great answers to that question (or even mildly good answers) the odds of your answers getting implemented are tso low you should not make national policy your main focus. So don't approach the advocacy of smart national policies as the pursuit of some attainable holy grail. Advocacy ends up being status posing and lame attempts at self psychotherapy. Avoid this. At the same time, it can be satisfying to understand what national policies really ought to be. Making sense of the world can be intellectually satisfying and even useful. But don't let national policy debates distract you from being responsible about your own career and skills development.

At the policy level here are some items the US government ought to do:

• End the immigration of all but highly skilled labor. The demand for low skilled labor is going to collapse and has already sharply declined.
• Push money and rules changes at automating education, especially higher education. Services are too expensive. Education is one of the biggest service expenses. It has to become more efficient.
• Automate medicine as well and for the same reason. Medicine is a large (over 17%) and rising fraction of total GDP. It is harder to automate than education. But it is also a bigger target.
• Reform patent law. Software patents are a barrier to innovation. Fix this. Stop the parasitism from ridiculous patents on obvious innovations. Alex Tabarrok has written a book outlining, among other things, what to do with software patents.
• Cut regulations in the labor market, especially around the whole bogus victim scam. No, you are not a victim just because your racial or ethnic group on average makes less than whites.
• Provide incentives for low IQ teens to stay unpregnant. Dollars for Norplant.
• Speed up the educations of the smartest so they'll get out of college sooner and be able to reach a state of being able to have kids before becoming infertile.

Any major items I've missed?