Russ Roberts Knotes Krugman Kontradiction?
No, I don't buy it . Roberts quotes Krugman as saying: People respond to incentives. If unemployment becomes more attractive because of the unemployment benefit, some unemployed workers may no longer try to find a job, or may not try to find one as quickly as they would without the benefit. Ways to get around this problem are to provide unemployment benefits only for a limited time or to require recipients to prove they are actively looking for a new job. This is supposed to contradict his statement that "enhanced UI actually creates jobs when the economy is depressed." Well, sorry, no it doesn't. In the first paragraph he says that extended unemployment benefits may reduce the incentive to look for a job. In the second statement he says that in the special case of a depression, the increase in aggregate demand can more than outweigh any disincentive effects for jobseekers. Krugman may be wrong on the latter point. But it does not contradict the first point, ...