No matter how hard they try, mainstream economists have a hard time wrapping their heads around the problem of unemployment in the Second Great Depression.
Brad DeLong is a good example. One on hand, he’s right: the appropriate comparison is the First Great Depression:
At its nadir in the winter of 1933, the Great Depression was a form of collective insanity. Workers were idle because firms would not hire them; firms would not hire them because they saw no market for their output; and there was no market for output because workers had no incomes to spend.
On the other hand, the unequal burden of economic dislocation did not stem, as DeLong believes, from the welfare gains of those who remained employed versus the welfare losses of those who were laid off; it was between the tiny group of employers who opposed New Deal policies and workers—both employed and unemployed.
And it’s the same today, as those on top are doing everything they can to stop policies that would put people back to work. That’s the basis of the latest round of collective insanity, which is converting today’s “demand-side market failures” into tomorrow’s “structural market failures.” And the longer people are unemployed, the harder it’s going to be for them to find another job.
As the economists working for the San Francisco Fed admitted,
In the first few weeks after losing their jobs, about 3 in 10 people are able to find work.
But after about a year of being out of work, the chances of landing a job fall to just 1 in 10 per month.
Mainstream economists like DeLong still don’t understand as much about unemployment in the Second Great Depression as songwriters like John Rich.