Re:

[ecwfm@xxxxxxxxxxxxxxxxxxx (bill mitchell)]

Paul Davidson astounded me this morning with his comment on unemployment.

Please tell me you were not serious.

Your reasoning that turnover is all bludgers and searchers reflects an
incredible ignorance. Perhaps you have spent to much time trying to squeeze
a sensible post industrial macro policy stance out of that 1936 tome to
actually appreciate what goes on in a capitalist economy, where the
unemployed are used by bosses as a buffer stock to protect their desired
margins. the reasoning you provide here could have been given by any
arch-neoclassicist who believes in natural rate theories and market clearing
outcomes. To avoid the label of having a communication problem with you (i
note that several people have had communication problems on this list over
tha last year or so and there has been a common element always!), i address
your own words.

First, of-course you can look at unemployment in several ways and a focus on
duration can illustrate important things. to go from that to say that the
average duration of unemployment is ONLY 13 weeks so it must be a turnover
problem (you: "its only a search problem due to incomplete information") is
a highly misleading piece of analysis.

the ave. duration is a very aggregate statistic. it contains no information
about repeated spells of unemployment. a common phenomenon is that long
spells (13 weeks is LONG! when you are without a complete income) are
interpersed with short periods in casual or low paid, low skilled higly
unstable jobs. So the same person could be unemployed chronically each year
but with short periods of unsatisfactory dead end employment in between. For
OZ (where the ave. duration is 60.2 weeks BTW) there is a lot of evidence
about this. i have read evidence from the USA too. what evidence have you
seen paul to the contrary?

Second, high turnover unemployment can be a huge problem and a principle
source of poverty and social malaise. there is a well developed literature
in the segmentation area which traces the links b/tw job instability and
wider social problems. give that dud Keynes a break for a while and read
Piore and Berger and the later work on job instability.

Third, the evidence (for many western countries including the USA) is that
search is typically done on the job in the security of an on-going wage.
that is search in the sense of career upgrading. people who regularly become
unemployed in between short periods of employment can rarely be construed
even in a liberal sense of the word to be searching for career advancement.
again the evidence is that they move b/tw jobs of similar quality - low pay,
low morale, low skill, low prospects. have you evidence to the contrary
paul? read Clark and Summers (1979) who say that figures indicating an
average duration of unemployment of 6 to 8 weeks have been used to support
the view that "the proponents of the dynamic [natural search] view interpret
a large part of unemployment as an indication of normal turnover as people
search for new jobs"

The figures relate to average completed duration of un. of all spells of un.
over a given period. read Ackerloff and Mann (1980) for a discussion of the
pitfalls in using this type of measure to substantiate your view. for a
start you have to consider the average duration of interrupted spells of un
(which is the length of un. to date) of those currently un.

Ackerloff and Main (1980) "strongly suggest that stats on average
unemployment durations of completed spells seriously underestimate the un.
experience of all groups of persons considered.  : persons with single
spells b/c on average single spells are longer than multiple spells; and
persons with multiple spells, b.c the un. experience of these persons
includes the multiplicity of spells."

You have to also look at the distributional concentration of the
unemployment experiences. Clark and Summers argued that over 40 per cent of
un. can be traced to persons who are out of work for more than a year.
normal turnover was found by them to account for only a small part of
measured un. (see Sawyer 1982 for this discussion).

i could go on. why bother.

third, it seems that when someone has a different opinion to you paul you
get abusive. For example, "bleeding heart liberals" who term people who face
huge un/vac ratios and to maintain the last skerrick of self esteem give up
looking for the needle in the haystack discouraged.

Well tick me off as a bleeding heart liberal.

fourth, you have never understood the discussions re: hysteresis which were
conducted with some vigour earlier this year. I knew you hadn't but you kept
insisting on your brilliant command of the literature and blustered your way
out of revealing that while you use terms like ergodic and nonergodic, you
clearly have not a full appreciation of sources of non-stationarity and
their relevance to economic theory. in your best traditions please read my
recent applied economics paper on this topic with reference to unemployment.

briefly, to say that the NAIRU (which i choose to call the macroequilibrium
un. rate  reflecting my belief in competing claims as the source of
inflation and which has no connotation with labour market clearing at all)
is cyclically insensitive denies all the evidence about hysteresis.

you say:
>There will always be some unemployed
>malingerers and "better" job searchers among us--  what good  economists,
>i.e., those that have hard-heads and brains to match while "bad" economists
>have soft-hearts and brains to match-) using a "tough-minded economics for
>a just society" label the
>natural (measured) rate of unemployed or sometimes NAIRUs. To adopt public
>policies to reduce the unemployment among the natural rate of unemployed
>via expansionary demand management will  merely cause
>inflation

well if structural imbalances occur as a downturn begins (and old capital is
scrapped and skills lost etc - read my Australian Econ. Papers article June
1987 please) then the measured MRU (NAIRU) can rise without a single new
malingerer being added to the un stock. and the process can be reversed
somewhat as firms alter their hiring stds as orders and sales rise. firms
often offer OJT in addition to a job slot (please read Thurow, Okun,
Doeringer and Piore and a whole host more).


I get upset when so-called hard headed and hard brained economists crucify
substantial amounts of empirical evidence and well reasoned literature to
pursue their own narrow goals. i call this lot -  ignorant and very poor
economists. sort of like most of the neoclassical school which has paraded a
nonsensical paragidm about the Labour market being like any other market and
un. ultimately being voluntary (and mostly malingerers).

where do you fit in paul?

kind regards to pkt
bill

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