Mulligan talks his book

by John Quiggin on November 8, 2012

Before engaging in another round with Casey Mulligan, I’d like to say that, while I find most of his arguments implausible, I don’t think he’s silly for making them. Given the position he’s trying to defend, these are the best arguments available. And that position is widely shared, not only by economists much more famous than Mulligan but by lots of governments and policymakers. Most mainstream opponents of Keynesianism are committed, one way or another, to the view that persistent high unemployment must be caused by problems in labour markets. But it’s much easier to talk in vague general terms about rigidities and structural imbalances than to present an operational explanation for the sustained high US unemployment of the last four years. Mulligan at least makes the attempt, which is more than most of the New Classical/Chicago/Real Business Cycle school have done, and necessary if there is to be any progress in the debate.

Replying to my criticism of his NY Times column, Mulligan suggests that I should have read his book. Perhaps so, but the column is presented as a critique of Krugman’s book, not a plug for Mulligan’s, and I responded in that light. His latest post mentions a couple of points where he draws on the book, but for the moment I’m going to continue to rely on data published elsewhere.

Mulligan responds to my points in reverse order, which makes sense, because his response to my central point is by far his weakest. The big difficulty for an explanation of post-2008 unemployment based on US welfare policies (unemployment insurance and food stamps) is that many other countries with radically different labor markets and policy responses experienced a big and sustained increase in unemployment at exactly the same time, following the global financial crisis of late 2008. In particular, lots of countries introduced austerity policies involving sharp cuts in the kinds of benefits Mulligan is criticising. Mulligan’s response to this evidence is handwaving. First he says that I haven’t calculated the implied changes in marginal tax rates, although its pretty obvious that most of them will be reductions. Then he resorts to US exceptionalism, saying

Finally, if marginal tax rates were found to be constant in Estonia (the only specific country that Professor Quiggin points to), does that mean that marginal tax rates do not matter in the U.S.? Please let me know so I can notify American economists that Estonia is our ideal laboratory, and notify policymakers that they can safety hike marginal tax rates to 100 percent without noticeable consequences.
That’s pretty startling for someone representing a school of thought which usually treats economic laws as having the same universal applicability as those of physics.

To try and make sense of an argument like Mulligan’s you’d have to start with the financial crisis as a global shock, then claim that, if only governments had sat on their hands, recovery would have been rapid. Instead, the argument would run, governments acted to alleviate the lot of the unemployed and thereby made things worse. That would be a coherent explanation for simultaneous and sustained increases in unemployment – the only difficulty is that it’s directly contrary to the facts.

It’s worth making the distinction here between changes and levels. Lots of European countries have high marginal tax rates and generous unemployment benefits, relative to the US. But, in many of the worst hit countries, benefits have been greatly reduced. By contrast in the US, benefits are very low but at least some have been increased. If, like Mulligan, you want to argue in terms of changes, then Europe should have seen reductions in unemployment (which was previously higher than the US). In reality, there is very little correlation between labor market policies and changes in unemployment. What has mattered has been exposure to the initial financial sector shock and/or subsequent austerity policies, exactly as Keynesian analysis would predict.

Now let’s look again at unemployment insurance and food stamps. Mulligan dismisses the point that the maximum duration of UI has been reduced, claiming that what matters is the extension from 26 to 52 weeks. That might be true in a brief recession, but in a situation where employment dropped sharply four years ago, and has yet to recover much, it’s obvious that lots of people will have exhausted their benefits. A look at the Department of Labor data confirms this. The most recent data shows 2.7 million continuing claims or 2.2 per cent of the covered workforce[2]. That’s near the historic lows for the series, comparable to the boom years of the late 1990s. It’s true that there are another 2 million people drawing benefits under the Emergency Unemployment Compensation legislation that’s due to expire at the end of this year. But even including them (and a variety of other benefits for veterans and so on) only brings the total up to 5 million, less than 3 per cent of the total labour force (around 20 million of whom aren’t even covered by UI). Less than 40 per cent of the unemployed are now receiving UI, and that doesn’t take account of the big drop in the participation rate since 2008.

On food stamps, I’ll link again to the Center on Budget and Policy Priorities, which notes that the primary cause of increased expenditure on food stamps is the growth in poverty and unemployment since 2008. There was a modest increase in the Recovery act, which, like extended UI is in the process of being phased out. But Mulligan raises an interesting point when he notes that the ratio of food stamp recipients to Medicaid recipients has increased. He implicitly focuses on the numerator, but states have been cutting Medicaid eligibility and payments ever since the budget crisis hit them. So, to the extent that Mulligan’s indolent poor are getting more free food, it’s offset by less, and harder-to-find, medical care. Overall, the incentives to stay out of work in the US don’t look all that enticing to me.

{ 51 comments }

1

Hidari 11.08.12 at 7:22 am

I’m not tryıng to be funny here, just tryıng to understand the point Mulligan is making. In his original NYT piece he wrıtes;

“In my new book, I explain how, in the matter of a few quarters of 2008 and 2009, new federal and state laws greatly enhanced the help given to the poor and unemployed — from expansion of food-stamp eligibility to enlargement of food-stamp benefits to payment of unemployment bonuses sharply eroding (and, in some cases, fully eliminating) the incentives for workers to seek and retain jobs, and for employers to create jobs or avoid layoffs”.

How does this last bit work? Is he claiming that capitalists “create jobs” because they feel sorry for the poor workers and want to help them? Or what? Genuine question.

2

John Quiggin 11.08.12 at 7:27 am

Good catch! I don’t think he has anything in mind here except “Labor market intervention bad”.

3

David Wright 11.08.12 at 9:18 am

Aren’t Keynsians also committed to the view that persistent high unemployment is caused by a problem in the labor market, namely the failure of wages to adjust rapidly enough downward? If wages were perfectly flexible, then even a massive fall in AD wouldn’t cause any unemployment; workers would just keep doing the jobs they had done before for a lot less money.

4

Phil 11.08.12 at 9:31 am

Clearly, the ‘employers’ Mulligan is thinking of are hard-faced capitalists who pay starvation wages to all their new employees (Can’t afford shoes for your children? You should have thought of that before you took the job!). This business strategy would be fatally undermined by an insistence on keeping the plebs alive whether they work or not: if you can’t create jobs on starvation wages, what’s the point in creating jobs at all?

When it comes to existing employees, though, these same employers are all heart. They’ll keep workers on the payroll even when they can’t really afford to, because they know the alternative is too awful to contemplate (I shan’t sack old Tom! His best days may be behind him, but I won’t send him to the workhouse!) This paternalism would also be undermined by decent levels of welfare, which would erode the incentive to “avoid layoffs”.

Either that or JQ is right and he’s making it up as he goes along.

5

Rob 11.08.12 at 9:38 am

Mulligan is obviously committing what Chris Dillow calls the “small truth, big error” mistake; it’s plausible enough that there’s some mechanism by which higher benefits might cause some jobs to go unfilled (if this were not the case, one would never be able to argue that there are some jobs with such poor pay and conditions that they deserve to go unfilled, and that the welfare state is a good thing for enabling this choice). However, to claim that modest increases in benefits, minimum wages or benefit time-limits could cause economic events such as those seen in late 2008 is quite a leap.

Also, Mulligan’s argument here can easily be turned against him: if demand had been managed correctly, it would never have been politically necessary to increase the time-limit on unemployment benefits. This is the position that allows someone like Scott Sumner to be simultaneously libertarian-ish and in favour of demand management. A right-wing Keynesian can argue in favour of greater stimulus when the economy is below trend growth levels precisely because it makes many other forms of intervention superfluous.

6

david 11.08.12 at 10:08 am

@David Wright

Keynesians also frequently argue that the relevant market failures are individually rational in some sense, not induced by state regs (and there are good reasons to think so; labour market regulations shouldn’t produce the observed steeply asymmetric nominal wage adjustment pattern, for example).

7

Hidari 11.08.12 at 10:15 am

Mulligan; “Austerity failed to revive their (European) economies, and probably further depressed them. But austerity is not opposite (sic) of redistribution (ie, hiking marginal tax rates). Think of how austerity might be implemented in the U.S.: we might cut Medicare and Social Security, but only for the more successful beneficiaries. Regardless of whether redistribution is achieved by withholding benefits from families with high incomes, providing more subsidies to families with low incomes, or both, an essential consequence is the same: a reduction in the reward to activities and efforts that raise incomes. Many kinds of austerity enhance redistribution , and that’s an important reason why austerity depresses the labor market.”

It’s important to see what Mulligan is arguing against here. Implicitly he is arguing against means testing which is a bıt surprising. But what he ıs really saying is this; No means testing is good. But what would be even better would be to cut Medicare but only to those who need it . It should of course be given to those who don’t need ıt as that would be anti-redistributionist which would benefit the labour market.

Shorter Mulligan; ıf you help the poor when they are dying of cancer you are anti-jobs. But the rich should get help from the state in the same circumstances even if they don’t need it.

8

John Quiggin 11.08.12 at 10:44 am

@David Wright No. Here’s Keynes “[T]he contention that the unemployment which characterises a depression is due to a refusal by labour to accept a reduction of money-wages is not clearly supported by the facts. “

9

ajay 11.08.12 at 10:48 am

1: he’s obviously falling more or less in line with the people who argue that the Welfare State, the New Deal etc can be attributed in part to the USSR, because they were efforts by Western governments to keep the workers happy and prevent a revolution.

An employer in the state of nature is constrained from laying people off because of his fear that his former workers will storm his mansion, burn his furniture and hang him from, I don’t know, some sort of tree or similar object. If the poor are well fed and cared for, they won’t rise in bloody revolt even when they get laid off, thus removing the incentive for employers not to lay them off.

10

reason 11.08.12 at 10:51 am

Hidari @1
Actually I think Mulligan means that if there were no unemployment benefits, then employers could cut wages more.

11

reason 11.08.12 at 10:56 am

P.S. This is not my view – just what I think a naive micro-economist like Mulligan might argue.

P.P.S. I really think Mulligan is not dishonest (like some others), he is just incredibly naive – see his actual piece about rationing in an emergency.

12

Hidari 11.08.12 at 11:37 am

“Actually I think Mulligan means that if there were no unemployment benefits, then employers could cut wages more.”

Yes. I think he thinks “Aha! Currently employers pay one worker some incredibly high amount of money…. like twenty thousand dollars a year. If all benefits were stopped an employer could hire twenty thousand workers, paying them one dollar a year!! Which would be great!!!”

13

Mao Cheng Ji 11.08.12 at 11:38 am

“Actually I think Mulligan means that if there were no unemployment benefits, then employers could cut wages more.”

That’s right. It’s a similar argument to the one against the minimum wage. Once they begin starving, they’ll be willing to accept any job for any pay, as they should. Because The Market. So, the employers will be hiring like crazy; who wouldn’t hire a worker for a bowl of rice a day? Next: libertarian paradise.

14

reason 11.08.12 at 11:49 am

This takes me to my previous point about Mulligan from the earlier post – Mulligan is a treasure. He just don’t know when it is politic to keep his mouth shut. Criticising unemployment benefits in a depression, criticising rationing in a natural emergency. (Would he make the same argument about water or basic foods?) He can make the same arguments where the downside is less obvious. But no he sees the piece of dog poo and he steps right in it. Amazing.

15

reason 11.08.12 at 11:55 am

Seriously, read the comments on his blog. It doesn’t take Professor Quiggin to debunk him, any man in the street can do it.

16

Tim Worstall 11.08.12 at 12:05 pm

“So, the employers will be hiring like crazy; who wouldn’t hire a worker for a bowl of rice a day? Next: libertarian paradise.”

Marxist, surely? For the reserve army of the unemployed would be gone and workers would indeed, in the absence of a monopsonist employer, gain the value of their work by hand and brow?

17

Phil 11.08.12 at 12:36 pm

So, the employers will be hiring like crazy; who wouldn’t hire a worker for a bowl of rice a day? Next: libertarian paradise.

The interesting part, as I said @4, is that he argues that unemployment benefit makes employers less likely to hire and more likely to fire (” sharply eroding (and, in some cases, fully eliminating) the incentives … for employers to create jobs or avoid layoffs“). So once you’re in the door and working for your bowl of rice a day, you’re set – the employer isn’t going to sack you, not nohow. Because, um.

18

Robert 11.08.12 at 12:48 pm

“I don’t think [Mulligan] silly for making them. Given the position he’s is trying to defend, these are the best arguments available. And that position is widely shared, not only by economists much more famous than Mulligan but by lots of governments and policymakers.”

The fact many are people are fools doesn’t make Mulligan any less a fool and knave. Or maybe you mean he is not silly to propagandize for the ruling class. He knows where his meals come from, and he need not care about the cognitive content of his statements.

In which case, one might better spend one’s time by only pointing and mocking Mulligan. Maybe one should try to intellectually engage more serious thinkers.

19

reason 11.08.12 at 1:16 pm

The guy just keeps giving. He is the living example of a Poe. I sort of wonder if he is also a religious fundamentalist. He seems to have that sort of brain. He never meets a complexity he can’t ignore.
http://www.google.de/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&ved=0CCgQFjAB&url=http%3A%2F%2Fwww.economist.com%2Fblogs%2Ffreeexchange%2F2009%2F01%2Fcasey_mulligan_is_a_brilliant&ei=YLCbUMqCBqag4gS28IH4Ag&usg=AFQjCNHBqxxgkOAHSy663jfRw-osH9xLhQ

20

rootless (@root_e) 11.08.12 at 1:26 pm

If wages were perfectly flexible, then even a massive fall in AD wouldn’t cause any unemployment; workers would just keep doing the jobs they had done before for a lot less money.

So firms seeing reduction in demand won’t reduce output (and lay off workers), but will simply continue to produce stuff nobody wants, and spend on equipment, materials, etc, but ratchet down labor costs?

21

reason 11.08.12 at 1:33 pm

rootless @20

But see (to Mulligan) – if labour costs are less they can reduce their prices (forget for the moment that they have nominal debts to repay) until those rich who have hoarded now think it is worth their while to spend more (even though the value of hoards is increasing all the time).

http://delong.typepad.com/sdj/2011/05/why-does-the-new-york-times-still-publish-casey-mulligan.html

22

sb 11.08.12 at 1:33 pm

That link to the piece with the calculation about ‘earning more by working less’ is infuriating. Yes, people’s wages are very low and child care is extremely expensive. They drastically underestimate the cost of child care for 2 people. There was an attempt under Nixon to create a national child care system which Nixon vetoed. But that is a solution to that idiotic scenario he paints. There are entitlement programs that might encourage people to work more. The implied better solution is for the family to have less food than they need.

Some of us aren’t shocked by the ‘earning more by working less’ scenario. Or bothered by it when it comes to poor families who can’t get decent housing, reasonable child care or afford the food they need–which is most poor families.

That’s what this is about, in the end: It’s about people having food security. I don’t give fuck all if it increases unemployment because we all know if some people don’t have food security they will go hungry. Granted, the economics doesn’t sound plausible. But the way the question is issue can never accommodate that concern. Will people have enough or will they be hungry if you fail to expand programs. If they will be hungry, then the decent person favors expanding the programs.

In the recent election, I was fascinated by the way that Ryan managed to get a twofer when he talked about how many families are on food stamps. For the compassionate (probably conservative Catholic) people he sounded concerned about the increase in poverty. For the people who hate the poor for getting any help, he would reveal the horror of increases in government assistance. He never said what he would do if there were widespread unemployment and a growing poverty rate but I’m pretty sure we can all guess.

23

reason 11.08.12 at 1:37 pm

Robert @18
Exactly.

24

John Glover 11.08.12 at 2:49 pm

Anyone who claims that unemployment benefits and food stamps are a disincentive to work should be forced to live on them for three months. They let’s see how incentivized they are to get back to work again….

25

MPAVictoria 11.08.12 at 3:20 pm

“Shorter Mulligan; ıf you help the poor when they are dying of cancer you are anti-jobs. But the rich should get help from the state in the same circumstances even if they don’t need it. “

That… that is just sick.
I would love for this guy to have to live off government assistance for a year.

26

Michael Sullivan 11.08.12 at 3:34 pm

David Wright @8: “Aren’t Keynsians also committed to the view that persistent high unemployment is caused by a problem in the labor market, namely the failure of wages to adjust rapidly enough downward? If wages were perfectly flexible, then even a massive fall in AD wouldn’t cause any unemployment; workers would just keep doing the jobs they had done before for a lot less money.”

Saying “if only we didn’t have downward nominal wage rigidity, aggregate demand shocks wouldn’t cause recessions” is a lot like saying “if nobody ever built anything within 100 miles of the ocean, hurricanes and tsunamis wouldn’t cause any major damage.” or “If we took chemotherapy drugs all the time, we’d never get cancer.”

Nominal wage rigidity in the short-medium term is not a “labor market problem”. The reason wages do not adjust rapidly downward is because of the many implicit and sometimes explicit contracts in the labor market which smooth spending for employers and income for wage-earners in ways that are extremely economically valuable to both.

Furthermore, there is a whole web of non-labor nominal price rigidity that has similar valuable effects in all times except severe AD crises, and would be enough to cause recessions in the face of AD shocks even in the presence of rapid wage deflation. This too would have to be eliminated in order for price adjustment to keep nominal demand shocks from producing unemployment and capacity underutilization.

Eliminating all of these price rigidities would amount to a massive increase in uncertainty, making it very difficult for capitalists and wage-earners alike to plan for the future, which would drastically reduce private investment, risk-taking and other forms of beneficial economic activity.

“labor market flexibility” is a complete non-starter as any kind of solution to the problem of AD shocks. It just always sounds good to the sort of people who think everyday wage earners have too sweet a deal, what with their ability to put a roof over their head and food in their mouths, and sometimes even have decent health insurance, or afford a solid education for their kids. Surely the money paying for some of those luxuries could be saved so that the billionaires could have some more.

27

Malatesta 11.08.12 at 3:37 pm

How does this last bit work? Is he claiming that capitalists “create jobs” because they feel sorry for the poor workers and want to help them? Or what? Genuine question.

Honestly, yes. As far as I can tell, a disturbing number of people – including ones who really really should know better – operate on the assumption of the Butler Theory of Employment.* Jobs are somehow seen as fundamentally about rich people paying the starving masses to do things for them. These things are often somewhat useless to the rich, and so we have to be very careful to keep things such that the rich are happy and the workers feel indebted and grateful to them. If the help doesn’t know its place, the help gets kicked out; what’s the point of being rich if you don’t get to lord it over people? Giving them options gives them airs.

* Butler Theory comes from me trying to make sense of right-wing claims that reductions in individual top marginal tax rates will cause the rich to hire more people. When you think in terms of why people are generally employed, i.e. because it is profitable to employ them, the claim makes no sense. But if you think of employment in terms of household servants, it all becomes clear. Extra money means I can afford a butler. And maybe a couple more gardeners. Some maids…

Now wildly extrapolate to the entire economy.

28

Frank in midtown 11.08.12 at 4:48 pm

Economists need to learn to incorporate the spooky effect at distance. Quantum economics could surely explain how unique US policies could drive outcomes everywhere else.

29

Barry 11.08.12 at 4:52 pm

Casey Mulligan’s public, written statement that Great Financial Collapse was caused by the prospect that a Democratic President would be elected in and of itself proved that the man is a liar, pure and simple. Any analysis of his writings should start with that, and only consider other explanations if dishonesty is disproven.

30

SamChevre 11.08.12 at 4:53 pm

for employers to create jobs or avoid layoffs

I suspect (but don’t know) that the policy in focus here was that normally, employers pay into unemployment proportional to the number of their former employees receiving unemployment. That increases the cost of lay-offs. The changes to unemployment in the stimulus were funded out of general revenues, reducing an incentive that employers had to not lay people off.

31

lupita 11.08.12 at 6:38 pm

Mulligan’s preoccupation with unemployment is obviously not the pain it causes to families and the strain in places on society, but its impact on production. His ideal society is therefore one that makes it impossible to not work in order to keep production up and growing. On the other hand, Krugman focuses on the collapse in demand and how to restore it to pre-2008 levels and keep it growing from there on, basically by subsidies and redistribution efforts.

Both just take for granted that the levels of production and consumption in the West were ideal prior to the crisis and that producing and consuming even more would be better. Both are capitalists for whom growth and the intersection of supply and demand curves are the purpose of life, society, and the universe. Neither acknowledges the global constraints to their propositions.

32

Michael Finn 11.08.12 at 6:38 pm

I have to ask this as a laymen; is the entire school of economics this hopelessly broken?
Here we are five years after the worse financial crisis in a hundred years and there is still no change in the arguements?

It’s like somebody who is choking on a piece of meat at dinner table and people arguing what is the best course for figuring out how to help the poor person. You have one side saying that the closed passage way is blocking the airway and starving the cells of oxygen while the other side is saying that the cells have so much extra carbon dioxide to spare that the last thing they need is extra oxygen to make more of it.

In said scenario, imagine of the person saying the last thing they need is oxygen was the doctor. You and everybody would be appalled that such a person was allowed to walk the streets, let alone practice medicine. The American Medical Association, along with the State board, would have his license yanked so fast that it wouldn’t even make the nightly news. Why can’t the field of economics get around this? We are sitting with literally trillions of dollars of economic losses because this field cannot get it together.

33

Dan Mulligan 11.08.12 at 6:42 pm

I’m puzzled why you would debate with Casey Mulligan using facts. Based on the last 4 – 8 years, such should be obviously pointless. I, too, find it hard to believe given his job position and the fact that he is allowed to “mold minds” of the next generation at a somewhat respected institution — but those are the facts.

34

Lee A. Arnold 11.08.12 at 7:04 pm

I just finished a cartoon animation last night that shows the simplest Keynesian explanation of a demand-side slump. The end of the cartoon combines and animates the FRED graphs for real and potential U.S. GDP:

35

Hidari 11.08.12 at 7:08 pm

@32 “Why can’t the field of economics get around this?”

“The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force. The class which has the means of material production at its disposal, has control at the same time over the means of mental production, so that thereby, generally speaking, the ideas of those who lack the means of mental production are subject to it. The ruling ideas are nothing more than the ideal expression of the dominant material relationships, the dominant material relationships grasped as ideas.” (you know who).

36

Ragweed 11.08.12 at 8:55 pm

@Michael Sullivan 26 / David Wright 8

Michael has it right on sticky wages. For one thing, sticky wages are not a Keynesian argument, they are a New Keynesian one, which is essentially a synthesis of neo-classical models with sticky wages and prices (and a few other things). Krugman, DeLong etc are really New Keynesian.

And the argument that persistant unemployment is due to sticky wages in the absence of adequate demand is taking the NK argument backward. The Neo-classical argument is, essentially, that recessions are impossible because rational workers will accept lower wages until the market equalizes, and persistant unemployment is due to government policies that don’t permit wages to adjust downward.

NKs argue that wages and prices are sticky for all the reasons Michael Sullivan describes – Wages are sticky because that is part of how an economy functions, not because of flaws in the labor market. Since wages and prices do not adjust downward easily, then you have to attack recession by increasing demand through fiscal or monitary stimulus until the labor market clears. Lowering wages is not really an option. (and of course you also have to add the issue of nominal debts for both firms and employess, which means that lowering prices and wages increases defaults and all the cost to the economy that entails).

37

Michael Sullivan 11.08.12 at 9:37 pm

Ragweed@36: One thing I left out, is that monetary stimulus, to the extent it either raises the inflation rate or lowers the value of the currency, is one very efficient way to get a downward adjustment in all real wages and prices, no matter how rigid they are in nominal terms.

That’s why monetary stimulus can be so effective.

Which also gets to the logical inconsistency at the heart of the conservative economic spin project. On the one hand, inflation is the devil and must be avoided at all costs. On the other hand, there are continual rants about labor market wage flexibility, when in fact the most economically efficient way to make wages more flexible is to encourage moderate inflation, a policy that most market liberals would enthusiastically support.

What was that Trilling quote John Holbo posted a while back? Oh yes, here it is:

“But the conservative impulse and the reactionary impulse do not, with some isolated and some ecclesiastical exceptions, express themselves in ideas but only in action or in irritable mental gestures which seek to resemble ideas.”

Yes. That. Pretty much exactly.

38

fledermaus 11.08.12 at 11:07 pm

Why anyone even spends time debunking Mulligan’s “work” is beyond me. He just goes back to the same discredited U of C handwaiving regardless. For example here he is back in May saying that the earned income tax credit also discourages work.

He’s a lost cause, wandering blissfully in an economic system that exists only in his beautiful mind.

39

Dave 11.08.12 at 11:22 pm

In response to comment 1: I think the idea might be by giving workers high benefits, it raises their reservation wage. In order to create jobs (or avoid layoffs), employers must then offer jobs at higher wages (or keep wages high).

40

Glen Tomkins 11.09.12 at 12:57 am

@38,

Mulligan sounds like the sort who still believes that Dreyfus was guilty.

41

gavinf 11.09.12 at 1:17 am

Even with our incredibly good economic conditions in Australia, and the federal government gradually ratcheting up both the size of the stick (more stringent employment program compliance, welfare payments haven’t increased in 10 years) and the carrot (reasonable minimum wage, tax free threshold now $18,000 per year), no one has been able to get the unemployment rate below 5%.

42

Glen Tomkins 11.09.12 at 2:03 am

@32,

Would that your confidence in the medical profession were justified, but, sadly, no.

Medicine is sometimes referred to as the second oldest profession. The truth status of that idea is lost in the mists of time, but very clearly there have been physicians, and people have been seeking their ministrations, for thousands of years. This despite the fact that rational calculation would have made that a clearly bad bet until the last century at the earliest. But when it’s Death asking the questions, people want to believe that there are answers known to experts, and people will insist that the experts have the answers, all evidence to the contrary notwithstanding.

Sure, that was then, this is now, and now we often do have answers. But much more often we don’t. In the end, even if we had answers earlier, those answers always fail. The pressure is still on to humor the patients.

My people on my mother’s side have been physicians for centuries. I come from a long line of charlatans. I’m a charlatan myself. No, not because I try to deceive. In fact, the major part of my job is undeceiving, shaking my patients loose of misplaced faith in my power. But if I shut my door to everyone who came to me in the belief, as Vonnegut put it, that, “Science is magic that works!”, I would have no patients. I have no choice but to be a charlatan, because the demand for my services is as faith-based as it ever was in the days of poultices and leeches.

To return to your idea that authorities of some sort would descend on a medical charlatan — well, that’s true in part, but really in an ultimately limited sense. Getting too far afield from FDA-approved interventions could get you in trouble. But even here, on the treatment end of the profession, a charlatan has a wide latitude to shoehorn treatments that are approved for some other diagnosis, onto whatever his or her pet diagnostic theory says these treatments should be misapplied to.

Only the treatment end of our profession is at all evidence-based, at least if we are talking about quantitative evidence. But diagnosis (at the level of the individual patient), and nosology, our list of diagnoses, are entirely matters of pattern recognition and consensus that, yes, this particular pattern is a real diagnosis, or yes, this patient is close enough to that diagnosis template that we should give him or her the diagnosis. But diagnosis and nosology are fundamental and primary, treatment is only secondary, it can’t happen until you’ve done the fundamentals, and get the fundamentals wrong and it infects everything down the road.

The past century or so we’ve been in one of our periodic episodes of intellectual retrenchment. A certain intellectual astringency, a bias against the florid growth of pet nosological theories, a bias against finding new diagnoses until and unless there is treatment whose quantitatively verifiable success establishes the existence of the diagnosis, has been the tendency for a century or so. But those good habits are just that, habits. And the habit of astringency is breaking down in the face of the need to have some answer for people who, in the memorable words of a Chronic Fatigue Syndrome sufferer, are “sick and tired of feeling sick and tired”. We’re getting back to the more usual state of medicine over the millenia, with pet theories and competing schools of thought springing out of the woodwork.

There just aren’t any official Inquisitors out there policing the fundamentals of Medicine, any more than there are such in Economics. You can spout the belief in just about any nosological heresy and not get in any trouble at all until and unless you cross the line into variant treatment. And even that line must inevitably fail as the list and characterization of diagnoses, for which there is no quantifiable evidentiary basis, becomes increasingly fraught and contentious. I’m pretty button-down for a charlatan, and that’s standard for my generation, but expect a distinctly more interesting cast to my successors.

43

John Quiggin 11.09.12 at 6:58 am

To Dan Mulligan @33 and others. If (Casey) Mulligan were an isolated crank, I’d ignore him. But he’s endorsed by people like Tyler Cowen who should know better. And, as I said in the opening para, most of the freshwater crowd and quite a few people who were once “New Keynesians” believe or go along with this stuff.

http://marginalrevolution.com/marginalrevolution/2012/11/the-redistribution-recession.html

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reason 11.09.12 at 8:51 am

Sam Chevre @30
No.
1. It is much too complicated for Mulligan – you are projecting things into him. If that is what he meant, he could have said it. It is the old “this is too simple there must be more too it” idea. Think Chauncy Gardener.
2. It doesn’t work, with such an incentive any movement in reducing the disincentive to lay off also reduces the incentive to employ new workers. Only a fall in wages affects both in the same direction (i.e. you need a general increase in the incentive to employ worker ceterus parabus – only a fall in real wages works – particularly in the simple SD cross that seems to be all Mulligan knows).

45

reason 11.09.12 at 8:57 am

Look – one thing we are missing here with Mulligan is that he is classically “not even wrong”. Everything he says has some truth. It is just that in the current circumstances, these effects are basically irrelevant – it makes no difference if people are less likely to take any job for any wage, if there are hundreds of applicants for each job. I think the micro-economics of the way we do welfare (especially in the US), can be improved. I think price controls result in queueing. But it doesn’t mean that I don’t think there are circumstances when these considerations are secondary. But Mulligan seems to have no concept of the real world at all. He doesn’t do anything as subtle as conditionals.

I’m sure Ben Freidman would have considered him a moron.

46

reason 11.09.12 at 10:21 am

I just realised of course the title of his book is also a treasure. Both the great depression and the current depression were PRECEDED by massive redistribution UPWARDS. Somehow, he didn’t notice.

47

Bruce Wilder 11.09.12 at 3:29 pm

Aren’t Mulligan’s policy preferences for continued redistribution upward?

48

Bruce Wilder 11.09.12 at 3:31 pm

Tyler Cowen knows very well, who pays Tyler Cowen.

49

Earwig 11.09.12 at 7:57 pm

“We are sitting with literally trillions of dollars of economic losses because this field cannot get it together.”

I guess Hidari batted this out of the park with that mystery quote, but it’s a point that can’t be made too often:

When an argument is useful, its falsity is irrelevant.

50

TGGP 11.10.12 at 5:08 am

Robert Moffin has read the book (I think he’s cited in it) and gives some detailed criticisms in this video from AEI:
http://caseymulligan.blogspot.com/2012/10/redistribution-recession-video-and.html

51

reason 11.12.12 at 9:39 am

John Quiggin @43
I thought it was clear to everybody now that Tyler Cowen is the David Brooks of economic blogging.

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