I Win My European Unemployment Bet
econlib.org
econlib.org
> Most of the harm of unemployment is psychological, not material. Holding income constant, the employed are much happier than the unemployed. Hence, no sensible person would want to see U.S. workers’ wages rise by 10% if the unemployment rate rose 3.5 percentage-points as a result. And psychology aside, remember that the welfare state forces active workers to support the idle. So when regulation forces wages up, even the lucky workers who keep their jobs ultimately forfeit much of what they gain.
If the goal is to improve happiness through applied economics then you should measure happiness, not make ad hoc justifications based on some other metric
Consider, would you rather spend a career with a single 1-year blemish where you had to live on the dole because you couldn't find work after changing career paths or whatever, or one where you were laid off four times for three months at a time? Those don't seem as symmetric to me as they do to the author.
That said, I think the points raised are valid. It does seem like in 2009 the market of academic economists was too bearish on the long term US unemployment situation.
Therefore I have little doubt that if you looked it up, you would indeed find that it's true that employment leads to increased happiness.
Source: I was just laid off.
18 years, 4 layoffs (and 1 walkoff) later, I can reflect back and say that he was only being emphatically honest. Each departure led to generous advancement, the sort that does not seem to come, these days, from loyalty to one's company or present role.
French here. I think he is stating the obvious, nobody is denying that. It's also the same reason it's hard to find a house in France: protective laws make both tenants and employers worried, and they filter quite hard the hiring/renting prospects.
On the other hand, once you are hired, being fired is pretty hard. So you don't have to worry about your boss being as abusive as you can find in the US because you can talk back.
Well, that's the theory. In practice I've rarely been talked badly by most people, the one time somebody was abusive, I told them to piss off, and they fired me. And I've never had any trouble finding a gig in my life ever since.
So your milage may vary as usual, but most people around me do report having a hard time with hiring/renting because of high steaks for both parties.
If your boss is abusive then the solution is not to talk back but to pack your stuff and move to a better job, and leave your boss with the problem of replacing you.
Is this satire?
As for his pride in his home schooled sons, and their agreement with their teacher, I'd call that expected and understandable bias.
Of course, he's able to selectively make bets when he feels most confident — but anyone else would be able to the same thing, and yet they don't.
For all of those that disagree with his methodology or conclusions, if you can reach him, I recommend putting your money where your mouth is and proposing a different bet with Dr. Caplan.
I see a lot of people in the comments offended by his tone. I see his tone as analogous to a soccer player celebrating after a goal. We should socially encourage such behavior for those who win fair intellectual bets. (Although there is such a thing as unsportsmanly gloating, although I don't think this is such an example.)
it won't work because people don't like it, but super interesting ideas that could potentially be applied in narrow domains
The are at several other reason US unemployment numbers are lower: they have different percentages in prison and, on the opposite side, nonstandard employment like the military. They have more clout to enforce favorable trade agreements. The numbers are calculated differently.
There maybe a difference in real employment numbers but these are not the figures and the conjectural cause for this unknown difference is just a conjecture.
No matter what category you put these groups in, you will have an uncomfortable discrepancy similar, although to a lesser degree, of comparing apples to oranges. This is because prisoners are not identical with non-exsistant people nor are they identical to employed people.
Additionally, since military is considered employment, Europeans could boost employment just by expanding their military: as if unemployment is caused by a small military. I sense this is not the conclusion the authors would like.
So I too will bet that 10 years from now, European unemployment numbers will be higher than the US. My explanation: the counting techniques, prison ratios, relative world influence, military sizes as well as greater employment security will remain about the same.
Without those modifications US unemployment is over 10%, EU unemployment well in the 20% even in the Netherlands.
An even fairer measure would be "active population" which is number of people working on jobs divided by the full population. Of course at that point babies and comatose patients count as unemployed, but I think it's fair because it correctly points out that the employed have to pay (in work, not money) for the entire population.
At that point US is high 30% unemployed, EU low 40% (about a 5% difference).
https://www.investopedia.com/financial-edge/0609/what-the-un...
Does this bet mean anything if the only employment you can get is 10 hours a week at minimum wage?
I know I'm stating the obvious, but it seems to me that this reality is not as abject as democrats make it seem to be.
Yes, because it's about relative rates. Unless you believe the EU is more "honest" about reporting unemployment numbers, the US numbers are just as meaningful.
> Most of the harm of unemployment is psychological, not material. Holding income constant, the employed are much happier than the unemployed.
This doesn't factor in that employed workers might be much happier in countries where they can work without the possibility of being fired at any moment for no reason hanging over their heads.
I choose free healthcare over employer supplied health insurance every day.
You pay for, it but the insurer is less cynical.
But almost more importantly, the healthcare isn't being delivered by companies trying to make a profit but from central funding instead. Sometimes that means making really difficult decisions such as NICE refusing to fund a cystic fibrosis drug because the US pharmaceutical company wants to charge $138,000[1] per patient per year.
But those difficult decisions mean the limited funding (and no funding can be infinite) can be targeted and spent to deliver the most benefit as a whole. Heart-breaking for those with children with C.F. but hopefully the U.S. drug company will soon back down. If it weren't for brexit they likely would have done so already.
This article explains NICE's QALY (Quality adjusted life year) methodology: https://www.nice.org.uk/news/blog/carrying-nice-over-the-thr...
One of the most important reasons to resist the privatisation of healthcare is because it would actually lead to worse outcomes for the same money spent as the decisions of where to direct funding would be less evidence based.
You're right, it's not free, and in fact needs more investment to prevent it being privatised. Britons spend less on healthcare than most, even in fact spending less per person than the US does through taxation alone[2].
[1] https://www.bmj.com/content/364/bmj.l1094 [2] https://www.bbc.co.uk/news/uk-42950587
They have flexi- but they also have -security.
> workers might be much happier in countries where they can work without the possibility of being fired at any moment
The reason why this is an issue is nothing to do with actually being fired, it is due to the difficulty of getting rehired...which is a bigger issue if labour markets don't function (and in most European nations, as the higher unemployment has risen, the more desperately the privileged few have clung onto their protections worsening the issue).
This is why Denmark went the other way: the logic for inflexible labour markets is only consistent when labour markets are not flexible. Remove that and target spending where it is actually needed i.e. on meeting the needs of the market.
The idea of stronger safety nets is also not particularly true (the idea of strong/weak never made sense to me). Social security is not universal as in the UK or US, it is based on contributions. And the reasons unions work, again in contrast particularly with the UK, is that they collaborate with employers (Denmark's union participation rate is anomalous but even compared with somewhere like Germany).
1) The fact that there are two possible outcomes does not make the odds 50/50.
2) As others have pointed out, he has a history of winning the bets he makes, well above 50/50.
Not every event with two outcomes is 50/50, you know :) And the article does point to both the subject of the bet - unemployment indexes, which are known to all participants and it's kinda the job of the economist to know what they mean - and why Caplan thought he would win. It may be, of course, that he won randomly and his theory is still wrong - but in general people that successfully predict real world outcomes are regarded better in most scientific endeavors than people that predict wrongly.
That's more like 1000-1 against.
His so-called smugness derives from betting: putting his ideas on the line and winning. I think he's the opposite of smug because he's humble enough to put his ideas to the test. Maybe he gloats, but I think we should socially encourage victors gloating (in fair competitions).
What's the hypothesis? Where's the valuable data gotten from this?
My idea of equivalent action: Me stating "the president 10 years from now will be the first 3rd party president ever."
Why? Who knows! And if I was right, and make a blog post that says "See, I was right!" And then point to a bunch of things that happened after my prediction that led to this result, what did we learn? Anything at all?
A point easily refuted
PDF - https://www.urban.org/sites/default/files/publication/59416/...
https://money.cnn.com/2015/10/30/news/economy/former-inmates...
https://www.nytimes.com/2015/03/01/business/out-of-trouble-b...
Even if the excons are model, PERFECT employees, the conviction could prevent them from getting a job.
Even if they have the greatest work ethic in the world, they might have gone into prison at 18 due to mandatory minimum sentences, came out at 23 with no skills and no money for education (or housing as a base of operations).
And, often the case, the system has fucked them, and they have no desire to participate in the system that fucked them.
I appreciate the author making such clear and well-stated points, that makes it easy to use to simple facts to refute his/her argument.
It's pretty clear in context that this isn't actually what they're talking about at all.
Caplan is responding to Quiggin's claim that mass incarceration has a measurable effect of targeting people who would otherwise have been unemployed if they had never been arrested and incarcerated in the first place. He's not literally arguing that releasing those people from prison overnight would result in them getting a job.
A full refutation of his argument would give an analysis of the number of ex-cons, their unemployment rate, the hypothetical unemployment rate based on the assumption that the US's current prison stock were diminished to that of Europe, and demonstration that US unemployment numbers would be higher than Europe's in this case.
You have made the motions of charitably interpreting the author's argument without actually doing so.
"Researchers from the Harvard Kennedy School who followed 122 men and women who had been released from the state prison in Massachusetts found that six months to a year after their release, just over half of the group had found a job."
That means he's actually right by a narrow margin. Most ("just over half") former inmates did find a job.
This source reports an unemployment rate of only 25%:
http://www.esrcheck.com/wordpress/2018/07/16/report-finds-on...
> I appreciate the author making such clear and well-stated points, that makes it easy to use to simple facts to refute his/her argument.
You didn't refute anything. Of course a conviction is career poison and one can write long-winded articles on the injustice of it. Still, the statistics say: Most ex-convicts can find a job.
On another note, his smug tone doesn‘t really help.
Also the difference between unemployment rate over time and labour force participation is interesting. https://d3fy651gv2fhd3.cloudfront.net/charts/united-states-l...
I was laid off last year, and I've been fortunate that I had a good salary and have been able to save a lot. Those few months I was unemployed were the happiest I've been in a decade. I did some traveling and projects around the house I've been wanting to do. In fact I quit claiming unemployment because the required job searches were killing my buzz.
Insofar as I'm aware it mostly means that US unemployment is under-reported.
The labor force participation rate has yet to fully recover from its pre-2008 levels, and you're not counted as unemployed if you worked an hour the previous week.
European countries, by contrast, have mostly not changed their definitions of unemployment since, and have a relatively sane definition of what it means to be employed. This is not to say it's perfect -- far from it. But at least they're not counting 1h/week Uber drivers as employed.
See e.g.:
https://qz.com/877432/the-us-unemployment-rate-measure-is-de...
It is the new welfare in parts of the south and Midwest where globalization has hit the hardest.
the unemployed are persons of working age who, in the reference period:
− are without work,
− are available for work; and,
− have taken specific steps to find work.
More detail would probably be helpful, but the harmonized rate attempts to apply equally across countries. There may be methodological differences, but I doubt those differences would be stronger than the difference the author of TFA found.
To quote directly from an official EU website [0] (which I presume is how employment statistics is defined within the EU):
> Employment (persons in employment):
> Employed persons comprise persons aged 15 years and more who were in one of the following categories:
> (a) persons who during the reference week worked for at least one hour for pay or profit or family gain.
> (b) persons who were not at work during the reference week but had a job or business from which they were temporarily absent.
---
From reading how the US government defines employment/unemployment/labor force participation [1], the definitions appear to be materially the same (employed means working for at least one hour in the EU and for at least 1 second in the US or being temporarily absent, unemployed means not being considered employed and having actively looked for work in the last 4 weeks, and not being in the labor force means not being employed and not being unemployed).
[0]: https://ec.europa.eu/eurostat/statistics-explained/index.php...
They are the same. There are six different levels of unemployment which are measured and published regularly. One of them, U3, corresponds to what the UN uses and is the de facto international standard. Back in the 1990s, the BLS decided to start referring to this as the "official" unemployment rate instead of one of the other five, in order to adhere to a common standard.
The US has not changed the definitions of the six different levels of unemployment.
25 years ago, the BLS changed the headline statistic that they lead with from U5 to U3, in order to provide an apples-to-apples comparison with what the UN measures. That change was 14 years before 2008, and the BLS still publishes all six.
http://cepr.net/documents/publications/US-EU-UR-2009-05.pdf
It'd be pretty silly of two professional economists to make a bet about two numbers that are measured differently. They know about U3 vs U6.
Also, I don't think anyone has changed their definitions of unemployment recently. BLS publishes all of them and the official rate has been U3 for like, 40 years or something.
Yes, turns out that there are a LOT of ways to measure this, and the people whose jobs it is to do so have chosen some, and even laid out the pros and cons of each of them. Yes, the definition of unemployment that you usually hear (U3) has things it doesn't count. But those choices were made intentionally because they thought it was more useful this way... not because they are too stupid to understand this, or because of a vast conspiracy.
I know nothing of the people or personalities involved...but this does not give me a good impression of the author. First, he never refers to anyone with a contrary opinion in any way other than "apologist". Second, he never addresses any other value than the unemployment rate as a number (for example, I can easily imagine an "apologist" being uninterested in his bet if they think he might be right about the numbers, but they value the regulation for other reasons). In never addressing their views, he dismisses them as unworthy.
I'm poorly versed in economics so I don't really have an opinion on the actual matter under debate...but I can easily see him writing a smug and self-congratulatory article on this topic that nonetheless gave me a better opinion of him.
What's wrong with the term "apologist"? It simply means one who defends a particular viewpoint or belief. (It comes from the Greek ἀπολογία, which means a "formal oratory defense" of a position.)
What? That's rather insulting to assume; I'm being absolutely serious.
> I don't believe I've ever in my life heard "apologist" used in a non-pejorative sense.
That's genuinely interesting. I've always heard it used in a respectful sense. We must run in different circles. (I've always heard it used of Christian apologetics.)
I wouldn't consider the term "apologist" to be pejorative at all.
Also why can't people have fun battling with words and bets? It seems better than revolution or fistfights to me.
They can, and it is definitely better than violence, but I don't conflate "fun" with "belittling and demeaning" . (not to imply that you do, just showing the distinction I am making). I can think of a few other "I won a bet" posts I've seen over the years and they didn't have this negativity associated with it, despite their authors clearly feeling proven justified.
I'll let the targets... no... the victims of the world's gentlest ribbing speak for themselves.
https://www.christianitytoday.com/history/issues/issue-65/ap...
The person you are responding to is correct. "Apologist" may be used as you say often in "modern" vernacular English, but it still is properly used as suggested.
I suppose it has to do with usage in different communities? Now I'll have to re-read this article to see if it changes the tone I read into it. (which will not be easy, because I'm definitely biased to view the author as mean/arrogant/dismissive now)
But of course, usage in practice is what defines words. The dictionary catches up later.
Seriously: "radical deregulation of Europe’s labor markets is long overdue" because you won a pub-sized bet? I'll take economic and financial advice with a tad fewer delusions of grandeur, thank you very much.
Dr. Caplan reached out to the other economists and they didn't respond (which could have included proposing a different bet with different values). He is very judgy about public intellectuals that don't bet on their claims. I wouldn't call that dismissive because said intellectuals impose massive costs on society if they're wrong. It's not enough to hide behind unquantifiable hopes.
> I know nothing of the people or personalities involved...but this does not give me a good impression of the author. First, he never refers to anyone with a contrary opinion in any way other than "apologist".
Apologist is a bit of a brash word, but it's a possible conclusion if a public intellectual is unwilling to put their ideas to tests and revise if necessary.
This thinking is as cropped at it can be. The US is also the country with the highest consumption of anti-depressants. And what not other social problems.
Besides the whole article being a bunch of patting one self's back.
This psychology thing is forgetting that being forced in a job that doesn’t pay enough to survive is a huge drain on the worker and their family.
Rant follows:
> Forget ideology. Let’s all join hands, admit that labor market regulation is a scourge [..]
But let's not forget who the real scourge here are. Wanna-be rulers of the planet who dress themselves up as economists (though they come in many forms and degrees) making up just-so stories about why their next excuse to circumvene (or prevent) standards for upholding apparently not so common decency or (down to) basic human rights in the work place is justified. Or "economists", and the politician who lay in bed with them (sorry to those truly led astray though!), who enable business practices that profit just their interests. Or those that think it's okay to bleed the planet dry and destroy our biosphere for a quick buck. The list goes on...
Not saying the author is one of such, but they sure as hell must be out there (I'm sure their decisions are all nicely dressed in numbers and growing curves and big words!).
As a particularly egregious example what sufficiently unregulated labor markets can do, slave labor conditions in low-cost countries are unfortunately _really_ "efficient", the higher the wealth gap the better. Or even outright slavery: Esp. uneducated people in poverty have a lot of kids to support themselves, creating an endless fountain of cheap (unqualified) laborers (don't let them get too rich or educated though!). Got a prison population sitting idly? Well, they seem like an easy target to be extorted for un(der)paid labor.
Obviously there's a need for regulation here. I don't think however the author would condone any of the above, yet historically and contemporarily there have been several instances of stuff like this.
Of course there's a lot of nuance involved, modern discussion in developed countries revolves more about the /amount/ of social safety the state guarantees to the citizens plus the implementation of which, not about the /whether/ it should at all. Violations of human safety and dignity at the work place esp. in developing countries are kept behind a comforting veil of cheap prices in the rich nations. Luckily things often improve when total wealth in a country rises, mostly because you need an at least somewhat educated and satisfied population at some point to keep growing which precludes subjecting them to the direst of existences. People's desires to not be screwed with too much play a big role as well (it's not all bad, after all).
Nonetheless social systems are lacking in many countries worldwide in aspects like education, healthcare, sanitation, housing, public services or (somewhat tangentially) good ol' infrastructure. "But who will pay for all this fancy social security?". Well, who has all the money? It's basically the top 1% who possesses half the net wealth globally, which is a lot even should the number be off by a fair amount (https://en.wikipedia.org/wiki/Distribution_of_wealth#Inequal...). They don't seem to have been paying all that much then it seems.
However, like above, I don't want to make this seem about /whether/ we should have unequal wealth or not but about /how much/. Instead of trying to minimize welfare, let's ask the other way round: How much welfare could the economy sustain (without choking itself off!)? How much economic inequality is actually sustainable without tearing society apart and making it blow up like has happened in mankind's history many times?
There's an intricate balance here and many structures and parameters to tune... At the both extreme ends of wealth distribution lies dystopia and history has not been nice to countries who have left the safe zone for one reason or another.
The world is complicated, many economic statements are purely statistical. But arguing in a world with lots of known unknowns and even unknown unknowns is complicated. Abductive reasoning, which is what he attempted to do, tries to find an explanation for an observed phenomen given some background knowledge. It is an inherently unsafe type of inference in the real world. And in this instance it's non-rigorously done by a human, meaning it likely suffers from one of the many kinds of glitch in naive probabilistic/statistical reasoning (long list at https://en.wikipedia.org/wiki/List_of_cognitive_biases) our species has. If you add your ability change the world as an agent yourself, things get even more complicated (self-fulfilling prophecies anyone?).
Good job on his bet though. Let's make a new bet: We have people "work or die": I bet unemployment would rapidly approach 0% (dead people can't be unemployed!). Man I should get into economics with this idea.
An important reason why we can't have nice things to a degree that should be possible today is ourselves, and to fix the woes of the modern world requires an extensive look at how we organize our societies and how we cause them to be or become dysfunctional. Statements like "hurr durr I win 19 bets" in a field that is riddled with conflicts of interests and that seems just as much to be about ideology and opinion (how come there exist so many "schools of economy"? I thought we all observe the same world) as about actual evidence and rigorous reasoning seem not very impressive.
Even a doubling in unemployment claims would be drop in the bucket compared to pension liabilities.