Casey Mulligan Nominates Himself for This Year's Stupidest Man Alive Prize (Yes, New York TImes, Why Oh Why Can't We Have a Better Press Corps? Edition)
Utter stupidity. Utter, utter, total stupidity. Nomination and Smackdown by Menzie Chinn:
Econbrowser: Hazards in Interpreting Seasonals: Professor Casey Mulligan... observes that while retail sales are about 15-20% higher in December than in the previous three months, retail employment is only about 4% higher in December than October, thus proving that fiscal stimulus cannot be very effective at raising employment....
Although the holiday spending surge is clearly associated with a high level of employment, it also shows how spending is a rather indirect way of creating jobs. That holiday spending of roughly $90 billion more in December is associated with about 500,000 additional jobs for a month -- that amounts to $180,000 per job per month! Both Christmas and the fiscal-stimulus act increase demand, but the fiscal-stimulus act depresses supply, because many of its major programs -- the unemployment-insurance extension, the food-stamp program expansion, the home buyer tax credit and more -- are directed at people with low incomes....
This figure (as well as Professor Mulligan's) is irrelevant.... [T]he employment that is relevant is the total employment associated with Christmas-goods production and distribution (in addition to retail employment)... the activity variable that is relevant is not sales, but US related value-added. So not: Δ(sales)/Δ(employmentretail) But: Δ(value added)/Δ(employment)
The value of retail sales incorporates the value added from retail services, plus the value imbedded in the goods themselves. Those goods were produced over the entire year (i.e., not all Christmas ornaments are made in December).... [T]he relevant numerator is smaller, and the relevant denominator bigger, implying the relevant ratio is smaller than Professor Mulligan purports....
There are many valid approaches to critiquing the idea of fiscal stimulus efficacy (e.g., CBO (Nov. 2010). This is not one of them...
And bonus "Laffer Curve" blogging from Menzie Chinn as well:
By the way, this article highlights the hazards of over-interpreting seasonal effects. The canonical example occurred forty years ago, when Arthur Laffer interpreted the seasonal correlation of GDP and money as a causal relationship [4] (critique here). (This episode is not written down in any textbook as far as I know, but is passed down by word-of-mouth as a cautionary tale.)
