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Soup Kitchens DId Not Cause the Great Depression Weblogging

Duncan Black watches Casey Mulligan continue to refuse to mark his beliefs to market in any way:

Eschaton: The Worst Person In The World: Casey Mulligan. The list of people I thought were smart when I was a grad student, but who are actually f@#$king idiots, grows.

Paul Krugman says--correctly--he is too busy to engage. He is correct. Paul has other much better things to do with his time:

Soup Kitchens Caused the Great Depression: Some readers have been asking me to reply to Casey Mulligan’s latest attack on my recent book. Um, no. Life is short, and if I spent my time responding to every attack on yours truly — or indeed, every thing Mulligan himself writes that I consider foolish — I would have no time to do anything else. So let me just outsource this to John Quiggin…. Quiggin does an admirable job…

And John Quiggin does the intellectual garbage pickup:

Food stamps cause global depression?: I’d expect a professor at the University of Chicago to be aware that the USA is not the only country in the world. That’s not true, apparently, of Casey Mulligan, who claims that the continued weakness of employment in the US is due to policies introduced in 2008 and 2009, which:

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.

Mulligan’s claims about US policy are dubious at best… but… why did unemployment move in the same way, and at the same time, in many different countries? Did Iceland expand its food stamp program? Does Estonia pay unemployment bonuses? Sadly, no. And while many countries adopted Keynesian policies in the immediate aftermath of the Wall Street meltdown, others did not, and most have now switched to the disastrous policy of austerity. An even clearer demonstration is given by the Great Depression, where nearly all governments pursued austerity policies after 1929….

This isn’t just a problem for Mulligan. The simultaneous occurrence of a sustained increase in unemployment in many countries, with different institutions and policies undermines any explanation of unemployment that works at the national level. That includes all forms of New Classical Economics, in which unemployment arises from labor market “distortions”, as well as Real Business Cycle theories (except if you stretch the idea of a technology shock to the point where “technology” effectively means “aggregate demand”).

Responding more specifically to Mulligan’s claims, his suggested mechanisms don’t fit… the period of eligibility for unemployment insurance was extended to a maximum of 99 weeks in the aftermath of the financial crisis. However, this extension has gradually been withdrawn…. Yet the employment-population ratio has remained at low levels not seen for decades…. Mulligan could still claim vindication if employment were to jump dramatically in 2013, but it’s notable that he predicts nothing of the kind. As for food stamps, the expansion in the number of recipients is not due to changes in policy but to the fact that, thanks to mass unemployment, many more people are eligible under existing rules.

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