Thursday, December 22, 2011

Noah Smith — "I shall now debunk the "Great Vacation" in one sentence."

Chad Stone explains the "Great Vacation" hypothesis: 
The “Great Vacation” narrative holds that unemployment insurance (UI) benefits...have dissuaded millions of unemployed workers from taking a job.  If...jobless workers would get off their duff (or if we would give them a good swift kick there), unemployment would plummet.
Some "neoclassical" economists (e.g. Casey Mulligan) have adopted the "Great Vacation" as their favored explanation for the recession we are in. The story has also made its way into the political discourse, where it is now a regular Republican talking point.
I shall now debunk the "Great Vacation" in a single sentence: 
If the labor demand curve slopes down, then a fall in labor supply should be accompanied by an increase in wages; since wages fell or stagnated in the Great Recession and have grown only slowly ever since, unemployment is not being caused by a decrease in labor supply.
OK, OK, I used a semicolon. Sue me.
Read it at Noahpinion
I shall now debunk the "Great Vacation" in one sentence.
by Noah Smith
(h/t Mark Thoma)

Neoliberals hoisted on their own models.

No comments: