Perhaps Demand Curves Slope Upward to the Right – or, Alternative-Universe Economics

by Don Boudreaux on November 14, 2009

in Prices, Work

Here’s a letter that I sent yesterday to the New York Times:

To combat unemployment, Paul Krugman supports “labor rules that discourage firing” (“Free to Lose,” Nov. 13).  If a student in my Principles of Economics course ever wrote such a thing on an exam, he or she would earn an F.

But no student in my class would ever write such nonsense.  My students learn from day one to distinguish intentions from results.  So my students understand that the intention of such labor rules might be to decrease unemployment, but that the result will be to increase it – because my students also understand that labor rules that discourage firing raise employers’ costs of hiring workers to begin with.  Firms will think twice – thrice! – before hiring employees who, once on the job, are difficult to fire.

If the goal is to decrease unemployment, raising firms’ costs of hiring unemployed workers is emphatically counterproductive.

Donald J. Boudreaux

Steve Landsburg also weighs in at The Big Questions.  Steve opens his post with humor as biting as it is appropriate:

It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).

It’s a dazzling performance. Time after time, Krugman leaves me wide-eyed with wonder at how much economics he has to forget to write those columns.


44 comments    Share Share    Print    Email

Previous post:

Next post: