January 28, 2013, 11:19 am
Filed under: Uncategorized

Matthew Yglesias says firms scaling down their in-house recruitment, in favor of internal referrals, is a sign of ‘hysteresis’ in the employment market, since it will make it harder for unemployed people without connections to get jobs. Could be. Or, couldn’t it just be that they’re starting to figure out that in-house recruiters are a waste as they don’t actually add very much value as most successfully filled roles ultimately trace to internal referrals anyway and so cutting out the pointless middleman is a relatively painless cost-saving measure?

Bryan Caplan scoffs at the idea that given the safety-net, at some margin there are people who might prefer to be unemployed than to be employed. In other words he (oddly, since I can confirm it from personal experience) rejects the idea that people have a reserve wage and/or that people might actually respond rationally to the utility curve which, given our current tax & benefits rulse, is notoriously-flat and even in some cases sloping downward for people making salaries up to $50-60k or so. How does he reject this possibility of rationality on the part of others, you ask? “Introspection.” Something about how he would hypothetically feel, if he weren’t a tenured university professor, at getting a wage cut vs. being laid off. Ok then. He also adds, by way of support, that the employment market ‘doesn’t clear’. Not that it clears more slowly or less efficiently, it just ‘doesn’t clear’. I see now why I could never be an economist, since I have this natural aversion to treating ‘how much’ questions as ‘yes/no’ questions, and from what I can tell it seems to be a requirement of the genre.

You guys read James Bowman right? If not why not?

But there is another explanation. It is that “austerity” is not really a strategy but the name we give to reality in order to avoid calling it — or thinking about it as — reality. When reality appears to us a long way off in the form of mere “austerity,” it still looks like a strategy, still looks optional. Uh oh! This strategy doesn’t seem to be working. Let’s try another! And so we turn to intellectuals like Professors Krugman and Tilford who are the perpetual motion men of our era, people who have a system figured out to turn reality into an infinite number of strategies, or maybe just one killer strategy guaranteed to turn the hard reality easy again. Count on them if you need someone to persuade you, or re-persuade you, that reality is optional.


4 Comments so far
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Re: Caplan. The podcast that Russ Roberts did with Mulligan was interesting. Like all economists that have a good idea Mulligan maybe puts too much weight on his idea, but his idea does carry some weight. I’m working at pretty miserable wages right now and often wonder if it’s worth it. That this notion would never occur to Caplan is amazing.

Comment by Mike

I guess I just took it for granted that there can be some margin at which some people would rather stay unemployed. One can dispute where that margin is and what it depends on (e.g. not purely monetary, etc.) but to say it doesn’t exist is surprising. I have a feeling I am misinterpreting Caplan there though.

Comment by The Crimson Reach

Yeah, I can, after re-reading, see that he’s just making an argument about labor markets clearing.

Comment by Mike

Re: work v. UI benefits, Ace has a post today.

Comment by ColoComment

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