Mulligan interview

Source: Wall Street Journal

The Saturday Wall Street Journal has a nice interview / overview of Casey Mulligan, including this cool cartoon.

Casey has done pioneering work looking really hard at how the ACA and other social programs work, figuring out exactly what their disincentives are, and calculating how much those disincentives are likely to affect people's decisions to work, go to school, and so forth.

This is hard work. Most of the punditocracy (I'm guilty too) sort of waves our hands at disincentives as a big source of economic malaise. Casey puts together the numbers. It's so much easier to just wave your hands about "demand," invent a multiplier, and conclude all our troubles would be over if the government would only spend so many trillions.  Disagree with him if you like, but only by doing the same thing and coming up with different numbers.

I enjoyed the comments on last week's fracas, that when the CBO found a lot of people who will quit jobs they were only keeping for the health insurance,

...liberals [including official statements by Chairman of the Council of Economic Advisers, Jason Furman] have turned to claiming that ObamaCare's missing workers will be a gift to society. Since employers aren't cutting jobs per se through layoffs or hourly take-backs, people are merely choosing rationally to supply less labor. Thanks to ObamaCare, we're told, Americans can finally quit the salt mines and blacking factories and retire early, or spend more time with the children, or become artists.

Mr. Mulligan reserves particular scorn for the economists making this "eliminated from the drudgery of labor market" argument, which he views as a form of trahison des clercs. "I don't know what their intentions are," he says, choosing his words carefully, "but it looks like they're trying to leverage the lack of economic education in their audience by making these sorts of points."

That's putting it mildly. The rhetoric of our national conversation is strangely asymmetric, a point made beautifully by Peggy Noonan last week in a more political context. Imagine if, say, a Republican congressman said how great it was that lower and middle income people were quitting their jobs, so they could become artists. He would be pilloried as completely out of touch with the realities of life in middle America. What, has he been hanging out with former President Bush too much?

But to economics, Casey has it just right. When did the CEA become a spin machine, and willing to use economic fallacies if need be? There are a hundred disincentives to work in America right now. Job lock was a big problem with our employer-based health insurance system, and I've written against it too arguing for a system based on portable individual insurance. But as economists, we are supposed to look at overall distortions, understand that employer and employee distortions contribute equally, and that jobs represent two-sided matches.  The idea that the full effect of government policy was to induce too many people to work is just silly.

Hey, work isn't fun. We do it for the money. If not for the money, for the health insurance. Sure, it would be great if the government would cover my health insurance, my food, gas, and housing, so I could devote myself full time to glider flying.

Update: In response to some comments, I guess I this point needs to be clarified. The incentive to work for health insurance does not exist in a vacuum. People quitting their jobs are not going home to take up art, live off their presidential-memoir income, and pay for their own health insurance. Casey's, and the CBO's point, is that the ACA lives on top of an alphabet soup of other programs and high marginal tax rates that give a disincentive to work.

Update 2: Focusing on who makes the decision -- it's ok because the workers chose to quit -- is a central example of abandoning economics to score a political point. A first theorem of economics is that it does not matter who pays the tax. The amount of bread sold, and the consequent change in surplus, is exactly the same whether the baker pays the tax and chooses to sell less at a higher price, or whether the buyer pays the tax and chooses to buy less and offer a lower price. The same point is true of employment. Now, as an exercise for the reader, go spot the same subterfuge in Alan Blinder's oped on the subject in Tuesday's Wall Street Journal.

A later zinger:

The larger betrayal, Mr. Mulligan argues, is that the same economists now praising the great shrinking workforce used to claim that ObamaCare would expand the labor market.

He points to a 2011 letter organized by Harvard's David Cutler and the University of Chicago's Harold Pollack, signed by dozens of left-leaning economists including Nobel laureates, stating "our strong conclusion" that ObamaCare will strengthen the economy and create 250,000 to 400,000 jobs annually. (Mr. Cutler has since qualified and walked back some of his claims.)

"Why didn't they say, no, we didn't mean the labor market's going to get bigger. We mean it's going to get smaller in a good way," Mr. Mulligan wonders. "I'm unhappy with that, to be honest, as an American, as an economist. Those kind of conclusions are tarnishing the field of economics, which is a great, maybe the greatest, field. They're sure not making it look good by doing stuff like that."

The article refers to Casey's papers. These are available at nber.org. I've been looking for ungated versions but didn't find them quickly. I've been meaning to write blog posts about them, but Casey writes faster than I can read them. Unlike some of my fellow bloggers, I've promised myself not to blog without actually reading what I'm blogging about, so that will have to wait a bit more.