The Great Reces­sion has not been a great vacation. Four years since the recovery offi­cially began, many people are still unem­ployed not because they don’t want to work, but because, with three job-​​seekers for every job opening, they can’t find any work. And they are trying to find work. Indeed, a new paper by Rand Ghayad, a vis­iting scholar at the Boston Fed and a Ph.D. can­di­date at North­eastern Uni­ver­sity, shows that unem­ploy­ment insur­ance hasn’t oth­er­wise made the unem­ployed less likely to take a job. If any­thing, it’s made them more likely to keep looking.

For a cer­tain class of con­ser­v­a­tive econ­o­mists, the unem­ployed must be funem­ployed. They just can’t con­ceive of a world where supply can out­pace demand; where excess demand for money and money-​​like assets can push the economy into a slump. (Paul Krugman’s classic essay on the Capitol Hill babysit­ting co-​​op shows how it can). Their belief that supply cre­ates its own demand is an age-​​old fal­lacy called Say’s Law, which isn’t a law, and hasn’t been one for a long, long time. As Krugman points out, it was dis­cred­ited enough back in the 1930s that it was thought some­thing of a strawman when Keynes debunked it back then. But yesterday’s car­i­ca­ture has become today’s conviction. Casey Mul­ligan, for one, has never met a problem he doesn’t think is a supply one. Back in December 2008, he argued unem­ploy­ment was exploding, because people were choosing not to work so they could get mort­gage mod­i­fi­ca­tions. By 2012, he decided food stamps were really to blame for job­less­ness. Need­less to say, these argu­ments don’t even pass the laugh test, let alone fit the data.


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