John Cochrane: I Would Never Dream of Suggesting that this Correlation Implies Causation!
Let’s say you come across this on the interwebs:
Then the person who posted it says this:
I purposely did not make any argument, draw any conclusions or anything else.
And the person who posted it is a prominent, high-profile right-wing economist.
What conclusions do you draw about that economist? About the economic effect of unemployment benefits?
Then you find this, from another high-profile economist:
Unemployment in NC & SC. (I’m not saying which is which). Can you tell which slashed UI benefits? Can you tell when?
— Justin Wolfers (@JustinWolfers) February 3, 2014
Now what conclusions do you draw?
Cross-posted at Asymptosis.
I would conclude that cutting unemployment benefits reduices the stated unemployment rate. The conclusion seems plain whether you are a left or right wing economist. I would also conclude the left and right wing economists make sterotypical assumptions about each other.
Over the last year we have been treated to economic data that indicated the unemployment rate was going down. Only to discover that each time the Unemployment Rate went down, the Labor Participation Rate also went down as real live human beings were dropped out of the labor force.
So, I wouldn’t even try to draw any conclusion about the first graph before seeing a graph showing the Labor Participation Rate in North Carolina during the same time period.
And since he didn’t provide one, I would assume there was some really good reason that he didn’t.
So they dropped out of the Civilian Labor Force and went into Not In Labor Force.
A graph of the change in UE in all states since NC dropped EUI.
http://idiosyncraticwhisk.blogspot.com/2014/02/the-end-of-eui-in-north-carolina-and.html
@Kevin: Odd that that graph doesn’t comport with Wolfers’. I don’t know how to explain that.
Interesting that NC was already at the bottom and dropping fastest before the UI cutoff. Don’t know why.
@All: Cochrane is making a very clear assertion with that graph as labeled. Then he says No! I would never make such a simplistic assertion!
Disingenuous.