Friday, January 25, 2013

A quick additional thought on Mulligan

I'm getting a few people saying that I'm being unfair to Mulligan - he's just pointing out something everyone ignores: the labor supply effects of the safety net.

First (if you're tempted to say something like this), people don't ignore that. That's just marketing for the research agenda (which is fine - you always talk like you're doing something new... no big deal at all). I'd venture to say that the labor supply effect of the safety net is the most studied thing about the safety net by economists. In addition to the safety net literature, of course, the optimal tax literature is also obsessed with labor supply effects (and rightfully so!). Indeed, the labor demand effects are what are relatively neglected (labor demand in general is relatively neglected compared to labor supply because data on labor suppliers is a lot more plentiful than data on labor demanders).

I say demand "relatively neglected" because of course there are lots of multiplier estimates associated with social welfare spending, and that includes the labor demand effects along with labor supply effects. When you estimate a multiplier for food stamps, you're really getting the net effect of supply and demand.

And if we want to explore a "redistribution recession" that's what you want. You don't want to isolate labor supply (unless of course you just have a research interest in labor supply - but not if you want to know the impact on employment)!

1 comment:

  1. The reason why everyone ignores the dude is that what he says flies in the face of common sense. Why in the world would you bother to cross city street to see the dude, let alone take a bus?

    I will explain it simply with one question:

    Where are all the want ads for jobs, where employers wanted to hire people for less than people were willing to work?

    This evidence would have to exist, if what Mulligan was saying were true.

    What is this theory? Is it the, I stopped running an ad because no one answered theory? Or, I stopped running ads because everyone said, I need more money than that. Or, I knew no one would work for $1.00 an hour, so I didn't bother to run an ad theory?

    We have measures for want ads. They fell through the floor. There is no "layer" of unfilled jobs, which an archeologist or geologist would identify as ash from an ill times volcano.

    This entire argument is stupid. There is no cause and effect between the two sides. If there is a demand, on which I can earn a profit, I don't stop looking for an employee because no one has answered the want ad yet. (Unless we have some disappearing demand trick).

    There would be lingering evidence of this demand

    Second, this demand wouldn't go away. If the demand was there last week, why isn't it still visible. Unmet demand doesn't sink into quick sand, disappearing from view.

    Last, the proof that Mulligan is a fraudster is in his assertion you took such care to report. Only a fraudster, who has complete control in a swindle makes such a statement. He wants to see how big of lie he can tell before someone calls him out. It is all part of the game to a fraudster.


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