Allright, this goes out to the financial engineers in the audience. How many of you caused a ton of damages in the financial economy because you never really got a solid handle on modeling liquidity in your theories and work? Raise your hands. It’s ok, this is a safe space. (Slight hand raise here.)
Don’t feel too bad, because certain academics, economists and government ideologues are going to cause a ton of damages in the real economy by arguing against unemployment insurance without also having a decent theory of liquidity. People are worried about the bad incentives of unemployment insurance in the abstract, but they are confusing bad work incentives with the effects of “cash-on-hand” (liquidity). So let’s look at some evidence.
Here’s two presentations from Raj Chetty at a recent Economic Policy Institute event on the long-term unemployed. He presented his research about where unemployment insurance stands not…
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