As an example of this, consider the semi-"helicopter drop" of money we had during the last recession: the extension of unemployment benefits. It turns out benefit cuts cause workers to accept jobs.
As an example of this, consider the semi-"helicopter drop" of money we had during the last recession: the extension of unemployment benefits. It turns out benefit cuts cause workers to accept jobs.
It comes out of a massive abuse of preference curves, a model that itself have some massive assumptions bouncing around (like that if your income increases, you will not switch preferences completely, just keep buying more of one or the other).
As for cutting benefits makes workers accept jobs, no surprise there. Cut benefits and it is accept anything or starve. Basically it is wage-slavery.
(Involuntary unemployment is when workers are employed at a wage K, and other workers are unemployed but have a reservation wage of K.)
Given that you agree with my factual claim (that giving people money directly causes unemployment), what do you disagree with me on? Is it just my mood affiliation that you dislike?
+ As opposed to a central bank engineered recession.
Classical (not Keynesian) economics does explain how a demand shortfall causes voluntary unemployment. It also explains how helicopter drops + substitution effect can cause voluntary unemployment. Involuntary unemployment is the tricky bit.
+ Post-war economists are obsessed with linear equations and closed form solutions that look like the 'laws' the guys in the physics department rely on. However once you take into account that wages (and rents!) are sticky, that means changing a workers wages from $10/hr -> $11/hr is different than $11/hr -> $10/hr. And then you're nice happy linear equations go out the window and you enter the land of Chaos theory.
I'm glad we are in complete agreement (apart from mood affiliation).