Wednesday, October 31, 2012

Dr. Mulligan vs. Dr. Krugman Round #8

Casey Mulligan makes a powerful case for his new book in this blog post.   His book argues that President Obama's well meaning policies for protecting those who have been hurt by the deep recession may have serious unintended consequences reducing the incentive to work and to save.   Casey is an excellent micro economist and he closely tracks how federal policies change budget constraints as they introduce funky kinks and non-linearities.  Such incentive effects can sharply affect the choices of rational households.

UPDATE:  In today's WSJ,  David Gamage provides strong evidence based on Obamacare's unintended consequences that supports Mulligan's main thesis.

During this deep recession, the University of Chicago's excellent economists have been surprisingly quiet in their public pronouncements on the role of government in the free market.   John Cochrane is blogging and so is Gary Becker and so is Casey.    But, there are probably 100 economists on that campus so 3% ain't a big number.  When you hold unpopular views during a tough time, what do you do?  Do you grow quiet or do speak louder to encourage an intellectual debate?  I respect Casey Mulligan's effort to grab the microphone.