17 Mar 2016

Murphy Growth Plan for St. Patrick’s Day

Drug War, Economics, Shameless Self-Promotion 5 Comments

Actually the article ran yesterday but I didn’t notice until today… My latest at FEE takes up the Gerald Friedman conundrum. An excerpt:

Turning to students: according to the Census Bureau, about 17 million are enrolled in high school. Assume that with no coercion and with plenty of entry-level jobs (thanks to abolition of the minimum wage), 7.5 million drop out and go to work. The census data also show some 19 million students enrolled in college or graduate programs. Let’s assume 10 million of them (a little more than half) don’t really belong there — and having worked as a college professor, I think that’s a conservative estimate.

Finally, consider that there are some 930,000 young adults (aged 16 to 19) who are currently unemployed, meaning they are actively seeking work but can’t get a job. Their unemployment rate is a whopping 16 percent, compared to 4.9 percent for the civilian noninstitutional population as a whole. Let’s assume that getting rid of the minimum wage would give these teenagers the same unemployment rate as everybody else.

Adding it all up, with rounding, we get about 19 million new workers entering the labor force. The existing civilian labor force is about 158 million. That means our policy changes would provide an immediate boost to the labor force of about 12 percent.

5 Responses to “Murphy Growth Plan for St. Patrick’s Day”

  1. Andrew_FL says:

    “When we consider that many robberies and homicides are ultimately due to the drug war, we can safely assume that full drug legalization would reduce the total US prison population by 500,000 people.”

    Legalizing drugs isn’t going to retroactively make their robberies or homicides legal. Nor should it.

    Legalizing drugs in the long run will reduce the percentage of the population in prison relative to what it otherwise would have been. If we pardon all non violent offenders for mere possession or sale offenses, it will even reduce the number in the short term. But not by as much as you’re saying here.

    But other than that, I basically agree with you. There’s a lot of other things that we could do, too, that would push the numbers even higher, but more are difficult to quantify.

    • Bob Murphy says:

      Andrew_FL what I’m doing is looking at ten years after the policy change, and getting GDP to be 40% higher than it otherwise would have been. So yes, if you agree with me that a lot of robberies and homicides won’t occur over the next ten years that otherwise would have, then the prison population in ten years will be lower than it otherwise would have. It will even be lower in absolute terms, because many people currently in prison for robbery will be released over the next 10 years.

      You’re right that strictly speaking I should have accounted for population growth, but I implicitly took care of that because I did the % increase in the labor force coming from drug legalization (as well as school reform). What really mattered for the calculation was how much GDP in 10 years would be higher. So even if absolute prisoner population is higher but % is lower (due to effects you are talking about), my calculation still works.

      • guest says:

        For what it’s worth:

        Prison populations can never be negative …

        *Takes a bow*

  2. Transformer says:

    While I would be a strong supporter of a proposal to decrease both taxes and government spending by 25% I’m not sure I understand the economics in the first part of your post that deals with the growth consequences of such a policy.

    Aren’t Mankiw and the Romer’s assuming the tax cuts are not matched by corresponding spending cuts ? While you an I would probably agree that replacing 25% of government spending with 25% of private spending would be a net gain, I do not think the models used in conventional economics would back this finding.

    • Transformer says:

      As often – I commented too soon. I see that’s exactly what the Romer’s are saying.

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