ALSBTALK:

It was ample experience with economists that prompted President Truman to request a one handed economist.  The sentence I quoted is one such experience.  When the economist is asked "Was the cause A or not-A?" a well trained economist will answer truthfully "Yes."

Let's try an example from law.  "Did the Long Island Railroad strike Mrs. Palsgraf's daughter with a scale owned by the railroad; or, did it not?"  And, you answer?  "Yes."  To two handed lawyer's yes there is actual cause and no there is not proximate cause.

So too is it with the marginal consequence of ----any---- unemployment "insurance".  

All decisions by all economic actors are net decisions rather than gross decisions.  

In gross does an extension of unemployment insurance benefits create a positive monetary attractor away from the labor market?  Yes.  A gross positive leisure attractor?  Yes.  In gross does an extension of unemployment insurance benefits create any negative repellers from unemployment?  Yes, for example, increased shame repels some individual unemployed persons from continued unemployment.

Everybody, let's do a little thought experiment of six steps.

FIRST STEP:  pick your top ten favorite positive attractors -----as well as----- your top ten favorite negative repellers.

SECOND STEP:  for the ordinary labor market, rank order by relative magnitude your attractions and rank order your repellers (a.k.a., an ordinal ranking).

THIRD  STEP:  for the ordinary labor market, identify the specific gross magnitude contribution of each of your favorite attractors and repellers (a.k.a., a cardinal ranking).

FOURTH  STEP:  Aggregate the magnitudes of your attractors and of your repellers, then subtract your repellers from your attractors, and that is -your- net appraisal of the consequence unemployment insurance in the ordinary labor market.  

FIFTH  STEP:  change the labor market materially in just two ways, one the the supply side and one on the demand side (good thing you only have two hands!).  On the supply side of the labor market expose the market to a huge increase in relocation transaction costs (e.g., must transform paper loss on "investment" in one's home into a realized loss and/or must nearly "double" housing expense to avoid sale or because can not make sale).  On the demand side of the labor market expose the market to a huge shift in geographic location of demand for labor away from the domestic market.  Now, no fair adding to or subtracting from either of your top ten lists, but instead keeping those two lists constant as to membership, how do the relative magnitudes change and are the rank orders stable?

SIXTH STEP:  in this new context, which would you rather be:  an ideologically pure talking points blowhard or a legislator?  

What!?  You are going to answer "Yes." again.  I'm shocked.

Michael

Professor Michael J. O'Hara, J.D., Ph.D.
Finance, Banking, & Law Department
College of Business Administration
Mammel Hall 228 
University of Nebraska at Omaha
6708 Pine Street 
Omaha  NE  68182-0048
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(402) 554 - 2823 voice  fax (402) 554 - 2680
http://cba.unomaha.edu/faculty/mohara/web/ohara.htm