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[email protected] (Casey B. Mulligan)



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

Unions and Inequality: Looking at the Obvious

August 21, 2020

At the same time that a particular labor union (teachers) has successfully pushed to keep school buildings closed, we are reminded that unions are part of the "solution to inequality."  As an update to an old literature on unions and inequality, let’s first look at distributional effects of closing school buildings.The chart shows that closing school buildings reduces learning for all groups, but especially low-income and minority pupils.  So the actions of teacher unions today (they are far more likely to have their schools closed) will add to inequality in the future as the pupils enter the labor market.Now let’s look at today’s labor market.  The weekly cash earnings of teachers are 22 percent more than those of nonteachers.  As a result of being offered more and richer fringe benefits

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Are Regulations “Job Killing”?

July 17, 2020

The traditional models of regulations and growth treat regulation as an adverse productivity shock (more inputs for the same output) in order to help the environment, fairness, or some other social good.  But a productivity shock has opposing income and substitution effects on labor supply.  Arguably a regulation that works as a productivity shock has no aggregate effect on jobs.Reminded how Gary Becker many times told me that "somebody benefits," I do not endorse the productivity-shock model of regulation, at least as relates to the Federal regulations added and removed over the past 20 years.  In economics jargon, the "rectangle" created in a market by regulation is not entirely wasted: some of it is a transfer to special interests and therefore not an income effect in the aggregate.

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Shoddy Executive Order Bears Fingerprints of Navarro and Krugman

June 24, 2020

An immigration Executive Order was issued two days ago.  I read it yesterday and gathered my thoughts and relevant memories over the subsequent 24 hours.

The EO contains immigration regulations and purported economic justifications for the regulations.

The EO’s economic justification is essentially that it is good to suppress labor supply during a recession.  I disagreed with such a conclusion when it was offered years ago by Krugman, Eggertson, and others.  The conclusion is just as wrong when it comes from President Donald Trump.

The empirical fact, which is not a surprise from a theoretical point of view, is that labor supply and demand matter just as much at the margin during a recession as they do during an expansion.  See Chapter 8 “Recession-era Effects of Factor Supply

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Dueling Memoirs: Mulligan vs. Bolton

June 23, 2020

What do readers have to say?
Style

A New York Times Review says that Bolton’s memoir "has been written with so little discernible attention to style and narrative form…."

One reader (who asked to remain anonymous because he/she fears retribution at work) finds You’re Hired! to be an "extremely well-written book." Brian Blase found it to be "enjoyable and easy to read."

Tone

Back to the review of Bolton, "Underneath it all courses a festering obsession with his enemies …the book is bloated with self-importance."

Pages xii and xviii of You’re Hired! explain how I was "the Apprentice" and that readers should be "prepared to be as amazed and humbled as I was."

By Joe Grogan’s reading, You’re Hired! is an "an insightful, honest, book …  free from score settling and self

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The Higher Ed Market after Floyd

June 6, 2020

@GlennLoury objects to what university administrators are doing. They are economic actors too, who will not benefit from a repeat of 1968, so it is predictable that their reactions might risk some scholarship, reason, and learning.But there is also competition in the industry and thereby an opportunity for an (aspiring?) administrator who expresses the interests of the many individuals who have not yet reached the fashionable conclusions. Something like the famous Zimmer letter. This competition might play out slowly given that (barring regulatory favors) universities will now compete in another important dimension: whether 2020-21 students are allowed to purchase a college education that does more than Zoom (which would have made 1968 impossible).
Moreover the Zimmer letter was not

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Labor Market Recovery Begins when States Begin to Open

June 4, 2020

The first chart below is an estimate of weekly US employment per adult.  It suggests that the bottom was the week ending May 7, and that a recovery may have begun.

The estimated recovery may not look large on the scale of the current depression, but it is about 7.5 million employees above May 7 and 3 million employees above late April.  Note that the entire recovery from the 2008-9 recession was "only" 7 million employees above population growth and took ten years rather than a week or two.

At about the same time, states began ending their stay-at-home orders.  E.g., Texas May 1 and California May 8.  I expect another increase in early June as more reopening occurs.  A big increase will occur when UI bonuses expire, which may be as early as August.

The imputation is based on the

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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.

Title I KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT
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

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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 economics21.org]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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