martes, 17 de agosto de 2010

A Challenge to Extreme Keynesians

De la entrada en el blog de Gregory Mankiw me quedo con la última línea, que no nos cae nada mal en esta época de polarización! "I am neither a supply-side economist nor a demand-side economist," I said. "I am a supply-and-demand economist."

Taken from Gregory Mankiw's Blog

Thursday, August 12, 2010

The key insight of Keynesian economics is that the problem during recessions is inadequate aggregate demand. Taken to the extreme, which some Keynesians do, it says that aggregate demand is the only thing you need to worry about during downturns. Changes in aggregate supply (due to, say, high marginal tax rates or adverse incentives associated unemployment insurance) don't matter, they argue, because employment is being constrained by the low level of aggregate demand.
University of Chicago economist Casey Mulligan offers a challenge to that view. Casey points out that there is a regular surge in teenage employment during the summer months because more teenagers are available to work (that is, the supply of their labor has increased). That is no surprise: It is normal supply and demand in action. But if aggregate demand were the main constraint on employment, this increase in supply should not translate into higher employment during deep recessions such as this one. But it does!

Most economists, Keynesians and otherwise, ignore this summer change in employment because we focus on seasonally adjusted data. But as Casey points out, the raw unadjusted data may have something important to teach us.

Casey might want us to take this as evidence against the entire Keynesian worldview. I would not go quite that far, but it surely provides a challenge to extreme Keynesianism. I am reminded of a response I once gave to a reporter who asked whether I was a supply-sider or a Keynesian. "I am neither a supply-side economist nor a demand-side economist," I said. "I am a supply-and-demand economist."

1 comentario:

Anónimo dijo...

I read the original article in the NYT. It is flawed.

It is true that Keynesians say that inadequate demand is the problem during recessions, and indeed it is.

That summer seasonal hiring still exists, even during a recession does nothing to disprove that. In a recession demand is depressed, unemployment increases, economic activity is reduced - but the world doesn't come to an end. People still get hired all the time. Note that during the worst part of the recession weekly unemployment filings were about 600k. Yet the largest monthly loss of jobs was about 500k. So obviously a lot of new jobs were being created even at the same time there was a NET loss of jobs. No one has ever said hiring goes to zero.

Therefore, it is totally unsurprising that during a time of inadequate demand the summer time hiring of teenagers continues, but at a reduced rate. That is true and that in itself proves nothing, save maybe how weak the economics profession is that it latches onto such things as proof of something more significant.