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[email protected] (Casey B. Mulligan)

Articles by [email protected] (Casey B. Mulligan)

Measuring Employment between Monthly Surveys

April 27, 2020

The Employment Situation Report by the Bureau of Labor Statistics comes only monthly.  It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8.

Three data sources provide employment information on at least one of the missing four weeks, with the results shown in the chart below.  The results suggest that employment has fallen more than 20 million and perhaps as much as 36 million by April 11.  This does not begin to count employees who had their hours reduced.

One is an attempt by Bick and Blandin (2020) to imitate the BLS household survey for the week of Sunday

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Show us the fevers

April 20, 2020

By all accounts, hundreds of millions of us are confined to home despite being perfectly healthy.  The purpose of all of this, we’re told, is to make sure that we do not bump into people infected with the coronavirus.

The wise people forcing us to do so owe us some evidence that in fact the virus is out there in sufficient quantities to merit draconian measures.  They point us to deaths in New York hospitals, and growing numbers of positive test results.  But those presumably were infections that occurred weeks ago (perhaps also some false positives).

Smart thermometers suggest that hardly anyone has had a fever for a couple of weeks now.  Perhaps this data is faulty or easily misinterpreted, but the wise people owe at least an explanation to the hundreds of millions of people

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30+ million out of a job

April 20, 2020

A one-size-fits-all policy, even at the state level, has been a mistake from the beginning.  Instead policy should be favoring decentralized mechanisms over direct control and ensuring that the chosen regulations deliver more net benefits than less stringent alternatives.  It is too bad that governments are causing so much harm at this critical moment by ignoring these longstanding principles of government regulation.

Expressed at an annual rate, the shutdown is already costing $7 trillion, or about $15,000 per household per quarter.  Employment had already fallen 28 million by April 1 and continues to fall as the shutdown continues.  Not only is the shutdown costly, but it is a cost-ineffective way of reducing the health harms

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Shutdown reduces the flow of GDP by 28 percent

April 17, 2020

New data from Alexander Bick and Adam Blandin suggest that the flow of real GDP is 28 percent less than it would be under normal circumstances.  Using two entirely different methods, I previously forecasted 25 percent and 26 percent.  Below are the details of my calculations from Bick and Blandin.

Bick and Blandin (2020) find that working hours per working age adult circa April 1 declined 27 percent from February.  Moreover, among those working in February 2020, between 59 and 61 percent are now absent from their workplaces either due to not working or working at home.  If half of the capital in those workplaces is idle and not replaced by utilizing capital located in home offices, then capital utilization has fallen by 30 percent and GDP by 28 percent.

The GDP calculation assumes

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What’s Wrong with this Reasoning?

April 5, 2020

FACT: the population density of NYC is 27K per square mile
FACT: the population density of Indianapolis is 2K per square mile
FACT: COVID-19 was able to be introduced and spread in a city with only 2K susceptible people per square mile (Indianapolis is such a city).

Conclusion: COVID-19 will continue to spread in NYC until either (i) the number of susceptible people falls to 2K per square mile or (ii) a vaccine.  i.e., until more than 90% of NYC has contracted and recovered from COVID-19.  [This conclusion says nothing about time frame; i.e., it could be years]

Does the conclusion follow from the three facts?

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Where did the fevers go?

April 2, 2020

This website tracks real time fevers using thermometers connected to the internet.  A first glance at their map suggests to me that:

fevers spiked two week ago.
The timing of the spike is similar across the country,
but magnitude greater in those regions with more COVID-19 deaths.
The time difference in the peak across counties is at most a few days.

Does this mean that the rest of the country is not significantly lagging NYC?  Or that COVID-19 fevers are a small fraction of all fevers?

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What’s Happening with Drug Abuse?

March 31, 2020

I don’t know where to find very recent counts of drug overdoses.  Below is alcohol sales, showing that the sales increase is greater for higher alcohol content (up to 75 percent for spirits).

If the increase in drug overdoses were also 75 percent, that would be an increase of about 1000 fatalities per week.

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Is a Shutdown an Overreaction?

March 31, 2020

60,000 – 80,000 Americans died from the 2017-18 flu, without exceeding the capacity of ICU beds.  This flu was experienced around the world.  Not a single country found it worth shutting down their economies in that situation.

In 2020 the forecast is that about 90,000 Americans will die from COVID-19, including some deaths due to insufficient ICU capacity.  Shutting down "nonessential" businesses is now the norm.

This forecast comes from the Institute for Health Metrics and Evaluation IMHE at the University of Washington.  Unlike me, IMHE are not amateurs with contagious disease time series.  With "about 500 statisticians, computer scientists, and epidemiologists on staff, IHME is a data-crunching powerhouse. Every year it releases the Global Burden of Disease study…."

At what

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Notes on 2020 CARES Act, in reading order

March 30, 2020

Note that this law is just one of multiple new COVID-19 relief laws.  These are my notes on the labor market provisions in the law, which are all of Titles I and II, and parts of Title III.

A.k.a., 7(a) loans
"Loans" to small businesses that maintain their payrolls
Payroll does not include any payments to employees making $100K+ annually
The loan amount is capped by the prorated amount of payroll for the prior year
The loans can be forgiven in whole or part
The forgiveness is capped by the minimum of
$10 million;
the sum of ongoing payroll, rent, utilities, interest;
the loan amount (itself capped at 2.5 times average monthly in the prior year).
The forgiveness is free from business tax.
For this act, a small business is less than

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An example of 7(a) perversion

March 30, 2020

Let’s say that you have 700 employees in the prior year, earning an average of $50K.

If you continue that between now and the end of Q2, Title I of the 2020 CARES Act will give you nothing.

BUT if you fire at last 201 of those employees, and THEN apply for a $10 million 7(a) loan, the entire $10 million will be forgiven at the end of Q2 as long as you keep enough of the 499 employees that remain.  Moreover, you pay no business tax on the forgiven amount.

You are eligible for the $10 million loan because your prior year payroll was over $10 million.  You are eligible for $10 million forgiveness because your payroll still exceeds $10 million.

In effect, the Federal government has paid you $50K per employee, tax free, to fire people pursuant to a provision called "KEEPING

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Notes on Families First Coronavirus Response Act, in reading order

March 30, 2020

Note that this law is just one of multiple new COVID-19 relief laws.

Division A

Section 1101.  Schools are incentivized to remain closed more days.
Titles II-IV, VI.  Small amounts given to agencies to be spent at the Cabinet member’s discretion.
Title V.  $1 billion for HHS to pay COVID-19 expenses for the uninsured.

Division B

Titles I and II.  School lunch money is now available when school is closed "due to COVID-19."
This incentivizes to schools remain closed more days, especially those getting the most school lunch money.
Will add the learning gap between poor and affluent schools.
Title III.  Raise limits on the duration of time that a household can participate in SNAP/Food Stamps.

Division C

Section 3102.  "Emergency Family and Medical Leave Expansion Act."

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The Economic Cost of Shutting Down “Non-essential” Businesses

March 27, 2020

We are currently fighting a war against the COVID-19 virus.  The war presents an obvious and massive tradeoff between “guns” – activities whose primary purpose is war production – and “butter,” which refers to the normal activities of households and businesses.  Without any improvement in our techniques for fighting the war, the sacrifices by households and businesses will be staggering and historically unprecedented.

This document enumerates and quantifies the sacrifices using two novel methods.  The results suggest that negative 50 percent is an optimistic projection for the annualized growth rate of U.S. GDP in 2020 Q2 if the nonessential businesses were not allowed to operate during that quarter.  GDP losses, while massive, nonetheless understate the true costs of the sacrifices

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Will write soon on the real economy

March 21, 2020

What is happening to the real economy right now is straightforward from the perspective of the supply and demand for labor and capital.  This perspective shows how the real-economy costs are massive, and largely unnecessary, especially to the extent that they continue more than a week or two.  (I discussed the political economy of this here).

This perspective shows how the recovery will look.

This perspective shows why equities are so much cheaper, beyond what is "justified" by reductions in the future dividend stream (hint: Irving Fisher, but as I have written in the past, do not interpret "interest rate" as the yield on Treasury Bills or Fed Funds but rather as the profit rate on real capital). 

I will write up the details soon.

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COVID-19 policy: your costs will be ignored unless you speak up

March 18, 2020

It is a fact that, despite requirements to the contrary, Federal health professionals do not consider the costs of health-enhancing rules and regulations in their normal course of operations.  Jerry Ellig has documented this fact in his regulatory report cards where he shows that the cost-benefit analysis from HHS (the Federal department making health policy) consistently ranks as one of the worst agencies in terms of considering costs as part of its regulatory impact analysis.  (Using other Federal agencies as a benchmark is an incredibly low bar!).

This HHS tradition is not new (Ellig’s latest report card was prepared in 20116), and continues even into the current administration, as I witnessed first hand.  For example, when HHS is of a mind to reduce the number of people uninsured,

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Subsidizing Addiction

March 11, 2020

In both 2015 and 2016, U.S. life expectancy fell from the previous year. A single-year drop had not happened in 22 years, and two consecutive drops had not occurred in more than 50 years. This sharp reversal in the national trend toward longer lives is widely understood to be connected to the opioid epidemic that began in the 1990s. The best kept secret about the epidemic, however, is how much of it – arguably most of it – resulted from Federal policy changes initiated by both Democrats and Republicans.

Opioids include prescription drugs like oxycodone as well as illicitly manufactured drugs like heroin and fentanyl. Since 2000, the Federal government has increased subsidies on both types of opioids and cut taxes on illicit opioids.

Medical professional organizations like the

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Challenger Sanders v Challenger Trump

February 26, 2020

Sanders and Trump both side with flyover country rather than the Washington bubble.  This approach is valuable on election days, albeit creating much personal inconvenience on the days in between.

As part of this, both will speak some of the truisms that are supposed to be off limits.  E.g., Trump’s "American carnage" in his inaugural address (if you think that was not a truism, look here).  Or Sanders’ admiration of the Cuban literacy campaign (as impressive as it was for literacy results, it was even more impressive as a political move, helping to cement Castro’s power for many decades).

A difference between Sanders and Trump on this is that Trump simultaneously says the politically incorrect while expanding the boundaries of his brand.  He says the truth in a way that goads his

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The Economic Impact of Sanders’ Radical Agenda

February 25, 2020

If fully implemented, but
otherwise implemented wisely, Senator Sanders’ agenda for the economy would
reduce real GDP and consumption by 24 percent. 
Real wages would fall more than 50 percent after taxes.  Employment and hours would fall 16 percent
combined.  There would be less total
healthcare, less childcare, less energy available to households, and less value
added in the university sector.  Although
it is more difficult to forecast, the stock market would likely fall more than
50 percent.

Previous analysis of Medicare
for All

When I was at
CEA, we used an extension of the neoclassical growth model to assess the economic
impact of “Medicare for All” (M4A), which we charitably interpreted as 100
percent public financing of the health sector, with (in Chapter 8 of the

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Is the Grand Canyon Just a Ditch?

January 13, 2020

[Originally posted at]The myriad deregulatory actions of the Trump administration are generating considerable cost savings, savings that even conservative critics of regulatory overreach are underestimating. Like the Grand Canyon, the vast scale of these deregulatory efforts (and their results) is hard to fathom.In just three years the administration has reversed hundreds of regulations, many of which drone on for hundreds of pages. And it’s done so without fear or favor. Many of the regulations reversed had been written and implemented at the behest of special interests, including large banks, trial lawyers, major health insurance companies, big tech companies, labor unions, and foreign drug manufacturers. Even officials within the administration underestimate what has

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“They desperately tried to prevent the truth…”

November 6, 2019

"They desperately tried to prevent the truth about the Famine from reaching the ears of the higher ups."

Raleigh, Helen. Confucius Never Said (p. 25).

Raleigh and others have described the problems in Mao’s China and Stalin’s USSR with communication up the political hierarchy.  But of course for Americans that history is hardly relevant.  In the USA, truth reaches the higher ups because we have democracy, a free press, and modern technology.  And we don’t have famines.

But we do have an opioid epidemic.  Below we see how it took almost 20 years for the U.S. government to pay attention, as measured by word frequencies ("opioid" or "opioids") in the Federal Register.

Only in 2017 did the opioid epidemic get as much attention as climate change.

Alternatively, we could look

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Trump’s economists will be missed

October 29, 2019

When the day comes (year 2029?) that a "progressive" Democrat occupies the White House, we can look with nostalgia on the good old days 2017ff when White House economists literally followed the textbook.

Surely the economists working for that new President will be no smarter than UC Berkeley’s Emmanuel Saez.  In his primary defense of Medicare for All, Mr. Saez now writes that payments to private health insurance are "just like taxes."

Saez understands that those brainwashed by old school economics will be thinking "health insurance premiums [cannot be] a tax [because] people have some choice."  Their mistake, he says, is that unlike "spending on food and clothes," premiums for employer HI are "mandatory." (The equivalence of premium and tax is also a central premise of their new

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Tragic consequences of cheap “meth”: more meth consumption and more meth overdoses

October 25, 2019

The illegal drug meth has been getting a lot cheaper, due to technological "progress" in manufacturing.  I have been telling people this for a while and that the tragic consequence will be more overdoses, but most people are under the (false) impression that drug overdose reflect only deaths of despair rather than a movement along a stable meth-demand curve as a result of increased supply.

Now the evidence of additional meth-involved overdoses is coming in.

See also the 2019 CEA report on the role of prices in drug overdoses.

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Cowen and Cochrane are confused about price controls

October 25, 2019

Tyler Cowen and John Cochrane think that the minimum wage traces out a labor demand curve.  It does not.  There are many ways that a competitive labor market can comply with the minimum wage, and cutting employment is only one of them.  E.g., change the composition of compensation, change the work schedule, change the location of employment, etc.

So labor demand could be wage-elastic but a socially costly minimum wage have no effect (or even a positive effect) on employment in a competitive labor market.

For a more detailed analysis, see also The Upside Down Economics of Regulated and Otherwise Rigid Prices.

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Medicare for All has Been Around for Years

October 11, 2019

Below is a chart of the fraction of Democrats (including Independents who caucus with Democrats)  that sponsor or cosponsor "Medicare for All" (M4A) bills, including Senator Bernie Sanders’ earlier versions under the title "American Health Security Act."  All of these would prohibit private health insurance (Ted Kennedy’s "Medicare for All" bills are not included).

This shows that M4A has enjoyed significant support for a number of years.  What is recent is for people to recognize what the bills actually say.

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Comparing Presidents Reagan and Trump: The Case of International Trade

August 7, 2019

“I am a tariff man…” President Trump, December 2018

“We should beware of the demagogues who are ready to declare a trade war against our friends—weakening our economy, our national security, and the entire free world—all while cynically waving the American flag.” President Reagan, November 1988

(If you have five extra minutes — and tissues to wipe away tears of joy, affection, and patriotism — watch the full Reagan defense of free trade.)

Many people would end the comparison here, but this is a blog for scholars, who look at actions as well as words.  Even for Reagan fans such as me, measurement is especially required when the rhetoric comes from an accomplished actor and politician succeeding at the highest levels – winning two governor elections in the largest U.S.

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Some Relevant International Trade Theory

August 6, 2019

Wednesday I will offer comparisons
of international trade policies in the Reagan and Trump Administrations.  The purpose of this post is to provide some
relevant background from international economics: quotas versus tariffs, the
Lerner symmetry theorem, and the magnitude of the economic costs of tariffs.

Quotas versus tariffs

When domestic producers seek
protection from international competition, two policy tools have proven to be
of interest: tariffs and quotas.  In
theory, tariffs are straightforward: the foreign producers have to pay a tax on
sales in the U.S. while domestic producers do not, which (hopefully) permits
the domestic producers to either raise prices or make more domestic sales or
both.  Domestic consumers pay more,
domestic producers earn more profit, and

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Economic Theory in the White House: An Index of 66 Instances in One Year

August 2, 2019

It is difficult to exaggerate the usefulness of Chicago Price Theory for economic analysis in the White House.  Below is an index of 66 instances that I can remember where Chicago Price Theory was directly and specifically applied to analysis (usually publicly released) of economic issues over a one year time frame.  As an example of what I mean by "directly and specifically," compare Chicago Price Theory’s Figure 19-3 to Figure 7-2 in the 2019 Economic Report of the President.
Figure 19-3 from Chicago Price TheoryFrom the 2019 Economic Report of the President
(the second derivative of the after-AI demand curve is part of the discussion in both sources).
]]>Economic issue analyzed by CEA
CPT pages
ACA employer mandate


Agency Compliance with Circular A-4

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