Lars Syll — Is employment all a question of incentives?

A couple of years ago – in connection with being awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2011 – Thomas Sargent, in an interview with Swedish Television, declared that workers ought to be prepared for having low unemployment compensations in order to get the right incentives to search for jobs.This old mercantilist idea has very little support in research, since it has turned out to be exceedingly difficult to really get clear cut results of causality on the issue....

What is needed more than anything else in these times is stimulus and economic policies that increase effective demand.

On a societal level wage cuts only increase the risk of more people getting unemployed. To think that that one can solve economic crisis in this way is a turning back to those faulty economic theories and policies that John Maynard Keynes conlusively showed to be wrong already in the 1930s. It was theories and policies that made millions of people all over the world unemployed.

Lars P. Syll's Blog
Is employment all a question of incentives?
Lars P. Syll | Profess, Malmo University