Casey Mulligan's thoughts on the Great Recession

At the St. Louis Fed's Fall Conference, it was my great fortune to see a presentation this week by Casey Mulligan, UChicago economist, NYT columnist, and book author Casey Mulligan. Casey's presentation was of a paper entitled "The New Full-time Employment Taxes," which is all about the implicit taxes on full-time work relative to part-time work that have been imposed or (presumably) will be imposed by Obamacare.

During that talk, Casey mentioned his book, "The Redistribution Recession," and made some other remarks that I interpreted as meaning that Casey thinks that efforts at redistributive policy were the primary cause of the Great Recession. However, it appears I was not quite right, as Casey was quick to point out in an email. Here is an excerpt that he allowed me to post:

I see a couple of possibilities:

(1) Redistribution did not cause the recession (by which I mean reductions over time in national average labor hours per capita), but it “thwarted the recovery.”  This has been the WSJ’s interpretation on a couple of occasions.  It means that, but for redistribution, the labor market would have hit bottom at essentially the same level (-10 percent for labor hours per capita) but would have returned to baseline significantly (i.e., years) more quickly.

(2) Redistribution made the recession, say, twice as deep as it would have been without (changes in) redistribution.  Under this possible interpretation, labor hours per capita would never have fallen 10 percent even “for five minutes.”  Instead, the recession would have bottomed out at, say, –5 percent.

(3) I do not have a pinpoint estimate of the relevant elasticities, which means that the –5 percent cannot be taken as a pinpoint-accurate estimate.  A reasonable person could believe that the behavioral elasticities are larger than I take them to be, in which case they could reasonably believe that labor hours per capita would have hardly fallen at all but for the enhanced redistribution.  I could not be sure that large-elasticity opinion is wrong, but I would tell that person that he is in danger of exaggerating the effects of redistribution.  The same applies to a reasonable person who thinks that the redistribution was depressing the labor market somewhat less. 

I confess that I had interpreted Casey's position as ascribing more explanatory power to redistribution than he does. I may have been influenced by recollection of Casey's New York Times articles, which attributed a substantial amount of the recession to redistribution-incentivized drops in labor supply as early as December, 2008.

In any case, I apologize for over-interpreting Casey's statements, and I hope this post will make clear the nuance of his view of the Great Recession.

On "Asian Values"

The protests in Hong Kong make me want to write about something that's bothered me for longer than I can remember.

There’s a strain of thinking called “Asian Values,” which basically says that human rights and democracy are things that the West either A) needs or B) is capable of handling, but which does not suit East Asian countries. This idea was heavily promotedby Lee Kuan Yew, who forged Singapore into a durable oligarchy. More recently, Xi and other Chinese leaders have declaredthat human rights and democracy are foreign ideas that must be rejected. Perhaps the starkest expression of the idea came from film star Jackie Chan in 2009:

"I'm not sure if it is good to have freedom or not," [Chan] said. "I'm really confused now. If you are too free, you are like the way Hong Kong is now. It's very chaotic. Taiwan is also chaotic." 

He added: "I'm gradually beginning to feel that we Chinese need to be controlled. If we are not being controlled, we'll just do what we want."

Of course, this is all B.S. Autocrats are always telling us why their autocracy is necessary. Faced with the success of democratic countries in the 20^thCentury, their only option is to claim that their countries are somehow different – that what worked for others won’t work for them. A few in the West may be tricked into believing this hogwash, motivated by outdated racial stereotypes that paint East Asians as collectivist, Russians as responding only to authority, Arabs as religious fanatics, etc. I’ve seen a number of pundits claim that Hong Kong’s protests aren’t really about democracy, but about anti-mainland elitist snobbery.

This idea is absurd, offensive, and obviously wrong. Studies show that Asian values place just as much weight on freedom and rights and democracy as Western values. The experience of Korea, and Taiwan shows that “Confucianist” East Asian countries want democracy, and that when they get it, they continue to thrive. All the “chaos” that Jackie Chan blabbers about didn’t stop Samsung and Foxconn from conquering global markets.

Personally, I’ve lived in Japan, and I work at a university with a huge Chinese presence. All my graduate students are from China. And I have seen no evidence that East Asians desire any different kind of relationship with their governments than the one Americans enjoy. Distrust of autocrats, desire for free speech and other rights, and a desire to kick out bad leaders appear to be universal.

But don’t take it from me. For a lengthier, more thorough rebuttal of the myth of authoritarian Asian values, read the 1994 essayin Foreign Affairs by former South Korean president Kim Dae Jung.

After the misadventure in Iraq, Americans are understandably souredon the idea of promoting democracy abroad through force. But that makes the idea of “Asian values” dangerously tempting. We want to believe that Asians don’t want or need the rights and freedoms we enjoy, because this gives us a convenient reason not to invade their countries.

We should resist this motivated reasoning. Invading countries is indeed a terrible idea almost all of the time, but that doesn’t mean we should stop ourselves from offering moral support to people like the Hong Kong protestors, who simply want to enjoy the same respect from their societies that we enjoy from ours.

The fact is, autocratic rule is causing real problems for people in East Asia, especially in China, but also in Vietnam, Cambodia and Laos – and of course, North Korea. Meanwhile, in South Korea, Japan, Taiwan, and Indonesia, East Asians are proving the “Asian values” idea to be a self-serving canard.     

Thursday Roundup, 10/2/2014

Thursday Roundup is a bit more sedate today, since I'm temporarily laying off cocaine suppositories and peyote milk tea.


Me in Bloomberg View

1. It's a good bet that Japan will have to monetize its debt. That will be an interesting an unprecedented macroeconomic experiment.

2. John Cochrane shouldn't be so quick to dismiss concerns over income inequality.

3. It's possible that high Wall St. pay is due in part to compensating differentials.


From Around the Econ Blogosphere

1. Brad DeLong is absolutely on fire this week. In one epic post he explains why Bill Gross got 2011-2013 so very wrong. In another, he calls out and chastises a remarkable number of inflation-derping economists who have refused to admit they were wrong in 2011. Ahh, 2011, the year that the 1970s died.

2. Paul Krugman says that the reason he seems mean is that he only gets involved in debates that justify being mean.

3. Economists rediscover the endowment effect.

4. Matt Yglesias politely smacks down Scott Winship, who has made a career of downplaying trends he knows perfectly well are real.

5. Joe Stiglitz says that macroeconomics uses crappy microfoundations. Technically an NBER working paper instead of a blog post, but whatev.

6. Tony Yates has more gripes with John Cochrane's talk on inequality.

7. Cardiff Garcia reports on deflationary pressures around the world.

8. Scott Sumner vs. Matt Bruenig is a blog battle for the ages.

9. In case you wanted to read another debate about whether economics is a science, here is a debate between Adam Ozimek and a troll named Pascal-Emanuel Gobry.

10. Robert Waldmann claims that 1960s macro equations perform well out of sample to this very day. I'd be interested to see some quantitative evidence of that bold claim.

11. Stan Veuger's reflexive, hand-waving dismissal of Michael Strain's excellent column on infrastructure shows that some conservative derponomists just refuse to believe that public goods exist.

12. Josh Brown has written a magisterial epitaph for Bill Gross' tenure at PIMCO.