Monday, September 07, 2009

Unemployment ... Just Another Word for Vacation

Now with extra-sad Add On.

Paul Krugman has a long article in the New York Times weekend magazine in which he makes the following observation:

[Economist Milton] Friedman certainly never bought into the idea that mass unemployment represents a voluntary reduction in work effort or the idea that recessions are actually good for the economy. Yet the current generation of freshwater economists has been making both arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is so high because many workers are choosing not to take jobs: “Employees face financial incentives that encourage them not to work . . . decreased employment is explained more by reductions in the supply of labor (the willingness of people to work) and less by the demand for labor (the number of workers that employers need to hire).”

Mulligan has suggested, in particular, that workers are choosing to remain unemployed because that improves their odds of receiving mortgage relief. And Cochrane declares that high unemployment is actually good: “We should have a recession. People who spend their lives pounding nails in Nevada need something else to do.” ...

I was pleased to find out that the phone calls complaining about no work and losing houses and bills not getting paid are all just voluntary time outs from the old 9 to 5 grind. For a minute there, I thought we were in deep manure.

Then I read this, also from the New York Times:

Rick Alexander, a master carpenter in Florida who has given up searching [for jobs] after months of effort, said the disappointment eventually became unbearable.

“When you were in high school and kept asking the head cheerleader out for a date and she kept saying no, at some point you stopped asking her,” he said. “It becomes a ‘why bother?’ scenario.”

Rick Alexander is truly an uneducated man. Now, if he had only taken a few of Dr. Mulligan's graduate seminars, maybe he would be thinking more clearly.

Add On: And it doesn't look like all the long vacations will change anytime soon.

A net -3% of employers said they'll hire in the fourth quarter, down from -2% in the third quarter, on a seasonally adjusted basis, according to the Milwaukee-based firm's survey of more than 28,000 employers. Before this year, the survey's previous low point was a net 1% hiring outlook for the third quarter of 1982 ...


Padmanaban said...

"Unemployment", It is the only word that most of them fears. Though many initiative steps are undergoing, but still many of them are suffering with this issue. One of the main factor is, most of them are aware of how to choose a job and ways to obtain job.

We should not wait until job comes, we should get involved to get the job. One of the way is to post your resume in a job portal.
jobs in india

Anonymous said...

Another way to combat the fast growing unemployment is to launch your own business. Even though small business is under attack now too, its those entrepreneurs that want to make a difference and not be a statistic. Being an entrepreneur was voted one of the top 5 most stable jobs to have.

Anonymous said...

Very good article. But again, where does all this put us really? Friedman out, Keynes back in, kind of? It seems that we are in the midst of a very long term economic identity crisis as we swing back and forth trying to steer a ship we obviously never understood in the first place. The only thing we really seem to know is that economics is never going to be a science, no matter how much the Friedman's and Keynes' of the world want it to be. Scholars imagine lofty ideas that governments translate into irrelevant laws that smart traders exploit to turn old fortunes into new ones. It is alchemy and everyone knows it.

Anonymous said...

Thank you, Friedman and Greenspan, and all the rest. Any idiot knows that buying useless shit for thirty years is not a healthy, strong, resilient, economic powerhouse. How arrogant.

Steve Hulett said...

The only thing we really seem to know is that economics is never going to be a science

One of my closest friends, a economist from Cornell, told me long ago:

"Economics can never be an exact science because you never know what the national population is going to do with its money on any give day."

If you get close to the right answer, you're doing good.

Tina Butcher said...

I totally agree with the last comment I was looking for jobs here on

Anonymous said...

More on Federal Reserve and economics here.

Bankers twist theories, suspect ones at that, to fit their reality. Sounds exactly like what politicians do. With our health and pensions entrenched and entangled within this corruption, we have no chance. This is why management repeatedly flicks labor off its shoulder like a flea. It's not labor law and weak ranks - it's that our futures are wrapped up in the same set of financial macros that theirs are. You want health and pension? Sure. The Federal Reserve can do that for you. You want public works projects and jobs? Sure. The Federal Reserve can make that happen, too. Homes, roads, bridges, dams, cars, unmanned drones, tanks, televisions - an entire first world identity? Whatever you want under the sun, central bankers, the Fed, the IMF, the World Bank, all magically make it happen. But when the bill comes due, we will take back every cent, and more. Get ready for the more, part. And here we are.

Anonymous said...

Those economists quoted are Marie Antoinette reincarnated.

DanO said...

Paul Krugman is outrageously wrong on most accounts. His Op Eds are the closest thing the Times has to "a funny page".

Anonymous said...

Krugman's just another tool. Nothing will change.

Anonymous said...

...casually says the non Nobel Laureates.

I'll tell you one thing he's 100% spot-on about.

"sooner or later Democrats have to take a stand against Reaganism — against the presumption that if the government does it, it’s bad."

Anonymous said...

O.K. DanO, exactly what was Krugman wrong about and why? (Actually, the article was more of analysis of the shortcomings of economic theorists in general than some kind of personal manifesto).

Please, DanO, grace us with your expertise and wisdom. Maybe you have the solution that has been eluding the rest of us.

Anonymous said...

It's astonishing how people rush from deifying one economist to the next according to which way the wind blows. I'm truly fed up with 100% certainties. Please. Even Roubini's statements now sound like a spanked puppy. And he believed America was f***ed before the crash.

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