A Keynesian Blind Spot

NY Times ^ | 10-31-2012 | Casey B. Mulligan

[Sir Napsalot]

(snip).... I explain how, in the matter of a few quarters of 2008 and 2009, new federal and state laws 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.

Economists normally think that eroding incentives (as they call it, raising marginal labor income tax rates) depresses the labor market rather than expanding it, and that it would be tough for the labor market to get back to its 2007 form without returning incentives to what they were back then.

Yet Professor Krugman asserts that he would end this depression now with an even bigger stimulus — with more help for the poor and unemployed — that would further erode incentives and further penalize success.

Remarkably, “End This Depression Now!” (Krugman book) says nothing about marginal tax rates or incentives to work, either as they actually evolved or as they would appear in Professor Krugman’s ideal stimulus. .... “End This Depression Now!” is full of interesting and relevant observations, but don’t expect its author to mention, let alone appreciate, a non-Keynesian explanation for any of them.

[Sir Napsalot]

Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

[Sir Napsalot]

Interestingly (NOT!), Prof Mulligan was being destroyed by NYT readers on the comment section.

[CPOSharky]

It’s amazing the amount of recognition Krugman gets for being wrong all the time. There must be a gear in libtards minds that is stuck in reverse.

[Sir Napsalot]

So far the reader comments I have read increasingly showcase Mulligan's point, A Blind Spot.

Keynesians simply could not take their blinders off, and accept some grains of truth from a non-Keynesian pov!

[Tublecane]

It’s not that they have a blind spot. It’s either many spots or total blindness, I’m not sure. Probably not the latter, since among his many faults Keynes was inconsistent, and he did occasionally stumble on the truth.