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Quotation of the Day…

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… is from page 74 of the late William Niskanen’s August 1998 speech “Creating Good Jobs and Good Wages,” which is reprinted as chapter 6 in the 2008 collection of some of Niskanen’s best writings, Reflections of a Political Economist [2]:

Finally, a growing chorus of commentators has promised to protect American workers against increased international trade, investment, and immigration.  So far, as long as total employment is growing, there has been little popular response to this noisy crowd.  This group, however, represents a potentially harmful coalition of the populist left and right when the U.S. economy next turns down.

These words were first spoken by Niskanen 18 years ago, when the U.S. economy was – as they say – “booming.”  And although the unemployment rate [3] today (June 2016), at 4.9 percent, is only four-tenths of a percentage point higher than it was in August 1998, the labor-force-participation rate today, at 62.7 percent, is significantly lower than was the labor-force-participation rate of 67.0 percent in August 1998.  (A falling labor-force-participation rate by itself tells us very little about the health of the economy.  It could be evidence that the economy is so healthy that it makes people so rich that many fewer adults than in the past seek work.  Or a falling labor-force-participation rate could be evidence that the economy is so sluggish that it makes people so discouraged that many more adults than otherwise simply give up looking for employment in the above-ground market.)

In part because for nearly a quarter-century now Americans have been falsely told that only the rich have prospered since the mid-1970s or early 1980s, and in part because of many still-lingering ill-effects – both real and psychological – of the 2008 Great Recession, lots of Americans today feel themselves to be in economic peril.  (I believe that much of this fear is founded in fiction – that is, the fear might well be genuine but it is grounded largely, although not exclusively, in a combination of economic ignorance and false beliefs about economic growth over the past 40 years.)  This widespread sense among ordinary people that they are in economic peril, when mixed with the widespread acceptance of mercantilist nostrums, has led precisely to the outcome that Niskanen warned of 18 years ago.

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