Casey Mulligan has a new book out, The Redistribution Recession: How Labor Market Distortions Contracted the Economy. It is another attempt by a “Chicago Bubble” economist to explain that we shouldn’t pay attention to any of the economic data about this recession. You see, Mulligan has a model so perfect that it can make economics transcend reality.
Earlier this week, he wrote an article on the New York Times Economix Blog, A Keynesian Blind Spot. Basically, it is Mulligan’s attack on Paul Krugman’s very good End This Depression Now! which I’ve written about before. His argument: great unemployment and food stamp benefits have made workers lazy. And more: knowing that great unemployment and food stamp benefits were available, caused Job Creators to lay off people and then not to hire people again.
I swear I am not making this up. Go and read his article. As I said, Mulligan is a “Chicago Bubble” economist. These guys are less connected to the real world than Franciscan monks. They have their models and their ideology and they don’t need anything more. Unfortunately, no one has yet gotten them to take vows of silence.
Rather than discus Mulligan myself, let me present to you a few of the many excellent comments on the blog. First up is Doctor Gonzo:
I especially don’t get the argument that food stamps, unemployment benefits, etc. took away the incentives for employers to create jobs. Last time I checked, employers don’t say to themselves, “Hey, look at how stingy unemployment benefits are for the unemployed; let’s create some jobs for them out of the goodness of [our hearts]!” They say, “Hey, I have more customers and more [orders] than before, let’s hire more people.” Without money to purchase those… orders, nobody is hiring. When consumers can’t order widgets, and the government can at zero interest rates, why not have the government order them? Then businesses will actually hire!
If only people had their unemployment run out after just 6 months. Then, after losing their house of course, they could fill a job as an apple-seller on the street corner!
The increase use of social programs was a result of unemployment not its cause. This is just more silly ideology.
This one by Stan gets at a typical bit of conservative economic hypocrisy. Liberals never claim that tax cuts on the rich don’t stimulate the economy—only that such incentives are not as effective as others. But conservatives really do claim that tax cuts for the rich grow the economy but spending on social programs do not. It’s amazing.
Is this a parody? How did this guy ever get through graduate school?
And finally, Larry:
In a country like Switzerland, where unemployment benefits pay 80% of your previous salary (up to a certain cap) for two years, it may be true that some people do not rush to get back to work. But in the US or other countries where benefits do not pay enough for a person to get by? Forget it. This theory would only be true if you include begging, robbery, selling drugs and prostitution as employment, because those are the only alternatives that many unemployed people would have nowadays if there were no social support network.
The Chicago economists have to break out of their bubble. If they do that, they might find they have something to offer society. Until then, it is just ideology—not science.