Economists Just Can't Figure Out This Unemployment Thing
Would you like to play get the economist? Reading Chicago economics prof Casey Mulligan trying to make sense of job losses in the recession is fun for everyone.
It's this kind of fun: "Payroll spending now exceeds what it was when the recession began, yet employment remains millions lower. Apparently, payroll spending is not enough to bring those jobs back." Hmm, if only I could find a model that accounts for that! Is there any conceivable reason that there would be fewer people making, all told, more money in America today?
This is what happens when people start working with pure numbers: real-world motivations stop making sense.
Then there's a particularly unpersuasive chart (dealing as it does in percentages, rather than actual numbers) of people who "chose" to earn more or less after September 2009. Oh, good day, sir! And readers should make sure to leave before they get to this pure-numbers clap-trap: "Unemployment insurance reduces incentives for unemployed people to accept a new job…."
What sort of uptick do we see when we include armed robbery as 'employment'?
Unemployment insurance: putting the PLOY in unemployment (since January 20, 2009!)
I wonder if U Chi prof Casey Mulligan gets asked about her Education co-star Sarsgaard a lot.
markets are perfect markets are perfect markets are perfect markets are perfect markets are perfect, and so on.
I for one admire this young woman's sense of initiative and can-do entrepreneurial attitude:
http://www.metro.co.uk/news/863632-two-year-old-offered-for-sale-on-ebay-woman-accepts-1-000-bid
I love this one:
"Some homeowners with underwater mortgages may react by earning more, while others earn less as they recognize that all their extra earning ultimately ends up with their mortgage lender."
Actually Mr. Mulligan, the "rational" economic behavior if you have an overburdensome mortgage is to secure a new job and simply not pay your mortgage and pocket your money. No one stays unemployed because they can't afford their mortgage.
Some beliefs can exist only in Hyde Park. I firmly believe that the University Chicago Economics and Philosophy Departments have single handedly destroyed American society.
Oh, Economists. Great at the Math Thing, not so good with the Human thought thing.
@dave press Actually, not very good with math, either. A lot of economics boils down to hand-waving so they can use nice linear models. Solving the real math, even if it could be formulated, is too hard.
I'm pretty sure that the only rationally self-interested reaction to "Hi, I'm an economist, let me try to explain that" is to run whoever's speaking over with a bus.
@DoctorDisaster Econosplaining.
@DoctorDisaster That reminds me of a CafePress T-shirt I made once with a guy in a pith helmet saying "Don't worry, I'm an economist!" (to go along with my "White Man's Burden" tote bags).
Isn't this just further evidence of globalization "working" as planned?
Sorry Choire, but the problem isn't with "pure numbers" like actual employment and payroll data, but the fact that economists almost always work in "pure theory" and then try to cram reality ("numbers") INTO it. Open any economics textbook and try to find a chart with labels and numbers on the axes…
What I'm saying is, actually exposing economists to "numbers" in the form of actual empirical data is a good thing, if it makes them realize their models are ludicrous (which shouldn't be terribly chard considering your typical economic model will begin with something like "Assuming perfect rationality over an infinite time span in an economy with one immortal household, one good, no depreciation…").
@stuffisthings
Ein housefold, ein volk, ein market?
So does being a freelancer, permanlancer or contractor count as “employed” and “on the payroll.” Are these models based on traditional concepts of employment that ignore the world of 1099 folks which is only growing exponentially. Because it seems like that is the 800 pound gorilla in every discussion of the job crisis.
@SpyMagician: Yup. Although that too will change as the IRS cracks down on freelancers… Right now in CA I pretty much am obligated to incorporate or go on payroll at every company that I freelance for.
That graph makes sense, it just takes forever to parse. Summary: Jobs that pay more than $100k/year have roughly the same hiring rate, jobs that pay less have dropped off.
Hi, Casey. Sit down. Sorry to call you into my office on such short notice. Listen, I'm really sorry, but we're going have to let you go. Annnnd you've been black-balled, so you're not getting any economics work for a while. Sorry about that!
Now, I've got two options for you. We're going to let you draw unemployment if you want. It's about $400 a week. But–and I think you really want to consider this–my cousin is a manager at that McDonald's down the street, and he said he can totally hook you up. $8 an hour. So, you know, 40 hours…that's about $320 a week, before taxes. But you're working! And hey, I hear UI will even make up the difference so you still come out with that sweet, sweet $400 a week.
What's that? You'd rather spend your time and energy looking for a job that will pay you a wage you can live on? I cannot BELIEVE you are so unethical as to stay on unemployment rather than take a shit job that will drain you emotionally and physically without providing you with a wage you can live on. That is totally insane.
@antarcticastartshere Seriously, this is right up there with the guy from the Cato Institute I heard on NPR claiming unemployed people just need to suck it up and relocate to where the jobs are. With their invisible money for moving expenses/ability to secure an apartment without a source of income/promise of less competition for the jobs that are available.