by Roger Koppl
I do not understand why so many pro-market commenters are opposed to extending unemployment relief. The supposedly killer, knockdown, unanswerable argument is that unemployment relief encourages unemployment. Hospital emergency rooms encourage drunk driving. Should we therefore close hospital emergency rooms? Continue reading
by Mario Rizzo
There seems to be broad agreement among economists that the current recovery from the recession will be characterized by a slowly falling unemployment rate. This makes a good deal of sense since the problem that created the recession was a misdirection of resources into a number of sectors including housing construction and the financial industry.
Reallocation of resources takes time. The government is not helping matters in trying to prevent adjustments by various (but not very successful) efforts to slow or reverse the rate of fall in housing prices. It is also difficult for market participants to determine the effect of possible new policies like Obamacare or any further jobs-stimulus legislation. Continue reading
by Mario Rizzo
Greg Mankiw juxtaposes opinion pieces by Paul Krugman and Gary Becker on dealing with the cyclical unemployment problem (aka “how to create jobs”). Becker’s blog post is especially worth reading.
Whatever the political benefits of appearing to stimulate the employment of labor, the economic problem really shouldn’t be stated that way. We do not want to bias the system toward utilization of labor instead of other factors of production. I don’t think the distortions created by cheap credit should be remedied by trying to create further distortions. Continue reading
by Mario Rizzo
There has been some important discussion emanating from Paul Krugman’s unoriginal question implicitly about the Austrian Business Cycle Theory (as well as other sectoral theories of employment shifts both during and outside of business cycles). (See Econbrowser, Marginal Revolution, Econlog, Angry Bear, for examples.)
His question, as Tyler Cowen states it: “…[W]hy, say, a housing boom – which requires shifting resources into housing – doesn’t produce the same kind of unemployment as a housing bust that shifts resources out of housing.” Continue reading
by Mario Rizzo
At the outset of the Obama Administration, as Greg Mankiw reminds us, their economists laid out a series of predictions about where the unemployment rate would be with the stimulus package and without it. Currently, the economy is doing worse than their predictions of unemployment without the stimulus and, of course, much worse than the predictions with stimulus. Continue reading
by Mario Rizzo
Paul Krugman continues to say on his blog that the fiscal stimulus was too small. After all, unemployment is rising quickly:
“[I]t’s rapidly becoming clear that yes, the plan was too small.”
Brad DeLong has also added his voice to the call for bigger stimulus, again largely because of the deteriorating employment picture. He also instructs those who disagree with him as to which objections to stimulus are reasonable. (The one I raise here is not included.)
However, Krugman and DeLong’s inferences are superficial. If we look more carefully at what is going on we see that macro stimulus is designed to hit precisely the wrong targets. The problem is not size but appropriateness. Continue reading
by Young Back Choi
Modern politicians of all strips promise to create jobs; in this time of economic downturn, the promises of job-creation are with growing urgency. But can government create jobs?
If by jobs one means any scheme by which people are paid money wages, the answer is, of course, “yes”. But there are real jobs that create value and there are phony jobs that destroy value. Government-created jobs are largely value-destroying phony jobs. Continue reading
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