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Not Terribly Original of Me, but It Must be Pointed Out to the Gray Lady

Posted By Don Boudreaux On March 7, 2010 @ 9:12 am In Reality Is Not Optional,Seen and Unseen | Comments Disabled

Here’s a letter to the New York Times:

Paul Krugman says that it is “bizarre” during today’s downturn to worry that unemployment benefits reduce people’s incentives to find jobs — indeed, that this concern is even at odds with “textbook economics” (“Senator Bunning’s Universe [1],” March 5).

Prof. Krugman must count himself and his wife, Robin Wells, among those who hold bizarre ideas – or who, when writing economics textbooks, misrepresent economists’ views.  Here’s what they wrote on page 210 of their jointly authored textbook [2]Macroeconomics [2] (2nd ed.), published in 2009: “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . .  In other countries, particularly in Europe, benefits are more generous and last longer.  The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job.  Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.”

Sincerely,
Donald J. Boudreaux

(HT to Walter Williams [3], who sent me James Taranto’s smackdown [4].)

UPDATE: I’ve modified the opening paragraph of my letter, and have sent the revised version to the NYT.  I do not, though, see that it changes anything substantive.  It remains over-the-top misguided to label as “bizarre” the concern that the disincentives that unemployment benefits unleash on searching for and accepting employment might outweigh any pro-employment stimulative effects of these benefits.

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URLs in this post:

[1] Senator Bunning’s Universe: http://www.nytimes.com/2010/03/05/opinion/05krugman.html

[2] on page 210 of their jointly authored textbook : http://books.google.com/books?id=dpTBdNGGrtUC&pg=PA210&lpg=PA210&dq=krugman+eurosclerosis+unemployment+incentive&source=bl&ots=GiMUCFpvMz&sig=vCcb2wkdXyBbx7wMDf_pjewae2U&hl=en&ei=FRORS-_BD8H08QaU9dz2BA&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBQQ6AEwAw#v=onepage&q=&f=false

[3] Walter Williams: http://econfaculty.gmu.edu/wew/

[4] James Taranto’s smackdown: http://online.wsj.com/article/SB10001424052748703915204575103720332317434.html?mod=WSJ_Opinion_MIDDLETopOpinion

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