American Unemployment: Scarier Than You Thought

Why the Current Unemployment Is Worse Than the Great Depression

04/24/2020

Listen to the Audio Mises Wire version of this article.

The latest report on new unemployment claims was abysmal, coming in at 4.4 million last week, some 100,000 more than surveyed economists had expected. The continuous claims came in at just under 16 million, an all-time record. Mainstream labor economists estimate that, all things considered, the actual unemployment rate now (which is only officially reported with a lag) is above 20 percent—a rate not seen since the darkest days of the Great Depression. Indeed, all of the job gains since the Great Recession have been wiped out in just a matter of weeks.

What’s worse, even though the official unemployment rate is probably not quite as high as it was in 1933 (when it averaged 24.9 percent), there are reasons to believe that our labor market is currently in even worse shape economically than it was at the lowest depths of the Great Depression. Furthermore, once we take into account insights from Austrian capital theory, we can see why Keynesian hopes for a rapid recovery—and calls for longer lockdowns due to health concerns—are misguided.

Why the Current Unemployment Is Worse Than the Great Depression

In the first place, there is a technical reason that the government’s official unemployment figures for 1933 are misleading: at that time, people who held “make work” jobs funded by government relief efforts were counted as unemployed. (In my opinion, this was the correct judgment.) If instead we use adjusted figures (according to Darby 1976) then annual unemployment during the Depression peaked at 22.5% in 1932. In other words, if we count unemployment in the 1930s the way we count it today, then arguably the “official” rate is already the worst in US history, period.

However, besides this technical issue, there is a much more fundamental difference between unemployment in the early 1930s and today: back then, the people out of work had been laid off. Yet today, the people out of work are in lockdown.

This is an enormous distinction. When the economy crashed following the stock market in 1929, consumers restricted their spending according to their preferences as to what was most expendable. Some businesses went under completely—and these were the businesses that were the least important, according to their customers.

At the same time, plenty of other businesses remained afloat, but they cut back their workforces. Again, businesses laid off the most expendable workers, as judged by the managers/owners.

Intuitively, during the Great Depression and any other standard recession, for that matter, the economic system sheds those jobs that are the least important, in order to gradually reallocate workers into niches that are more appropriate. The deeper the malinvestments have been during the boom phase, the more workers will find themselves in unsustainable outlets when the crash occurs. But given the fact that X percent of the jobs need to disappear, the market economy during a normal downturn sheds them in the most economical areas, causing as little disruption to the flow of goods and services as judged by the consumers.

In complete contrast, today the principal criteria for which 20+ percent of current workers have lost their jobs are (1) they don’t work in an occupation that can be done from home and (2) they aren’t deemed “essential” by government officials. Naturally, these criteria don’t come close to approximating what is the most economical way to shed jobs, from the perspective of consumers.

An Analogy with the Household Budget

In the previous section, I argued that our current labor market disruption was much more economically significant than what was seen even during the depths of the Great Depression. Let me use an analogy to drive home the point.

Suppose your household were forced to restrict its spending by 25 percent. (Indeed, this might not be a mere hypothetical for many unfortunate readers right now.) However, there are two options for achieving this outcome. Under Option #1, the adults in the household get to decide where they will cut their spending, subject to the requirement that they reduce the total by 25 percent.

Under Option #2, an outside government official—in consultation with various experts—forces the household not only to cut spending by 25 percent, but also specifies where the spending cuts will occur.

Which option would be more burdensome? The answer is clearly #2.

Likewise, given that the economy has to endure an unemployment rate above 20 percent, it’s far preferable if consumers and business owners get to effectively pick (through voluntary market actions) which workers are laid off. It is far more devastating to endure our current situation, in which the workers who have lost their jobs have been selected by technological facts (i.e., whether a job can be done remotely) or through the political process.

Continue reading…

From Mises.org, here.

ר’ משה ברנדסדורפר העיד שקר במזיד נגד הקרבנות של ברלנד

בס”ד, כ”ד אייר תש”פ

הודעה חשובה למגדלי ומשווקי ארבעת המינים

היות ואחד מראשי הממונים על הפיקוח של ארבעת המינים שע”י “היכל הוראה – קנה בושם” נתפס לאחרונה בעודו מעיד עדות שקר בבית דין, והדברים התבררו היטב במותב תלתא ובפני שני הצדדים, והוברר לחלוטין שהנ”ל העיד עדותו לשקר במזיד מתוך כוונת עושק וחמס, וגם כעת אחר שהתגלה קלונו ברבים עודנו עומד במריו ומסרב ברמות רוחא לשוב ממעשיו הרעים, לפיכך עפ”י שורת הדין אין כל ערך לתעודת כשרות שמבוססת על פיקוחו, וכל מוצרי ארבעת המינים שבפיקוחו דינם כדין ארבעת המינים הנרכשים בשוק חילוני ללא כל כשרות כלשהי.

ולפי שהתורה חסה על ממונם של ישראל, לפיכך הוצרכתי להקדים הודעה זו כעת.

וע”ז באעה”ח

פנחס שפירא

נ.ב. בתאריך אור לי”ח אייר, בשעה 12 בלילה (לערך), טילפן לביתי מר א”ט אשר הציג את עצמו כתלמידו של הנ”ל וכן של המדיח והנואף והעושק אב”ר שר”י [א”ה, הכונה “אליעזר ברלנד”], והתרה בי לבל אעורר על הענין, כיון שכמה עשרות מאנשיהם רוצים לבוא ולרוצחני נפש בעבור כך.

ולפי שלימדונו חז”ל “אל תאמן בעצמך עד יום מותך”, הנני מוסר מודעה כדלהלן, שבאם חלילה איאלץ בעתיד (מחמת איומים שונים של אינשי דלא מעלי כנ”ל) להוציא הודעה הסותרת אפילו במקצת הודעה זו, הרי שההודעה השניה תהיה בטלה ומבוטלת, משולה כחרס הנשבר, כעפרא דארעא אין בה ממש. 

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Private Policing: Wave of the Future

Private Police Coming to a Neighborhood Near You! Why Private Police May Be an Important Element of Future Law Enforcement

Modern policing is a very challenging endeavor. It requires a large degree of foresight, nimbleness, adaptability, risk taking, and commitment. In addition to the practical challenges involved in reducing crime and making communities safe, law enforcement has been challenged with sharp reductions in budgets, and, thus, resources. For instance, the number of sworn police officers in California fell from 81,286 in 2008 to 77,584 in 2011, a decline of roughly 5 percent, which translates to a 7 percent decline in the number of officers per 10,000 residents.1 To deal with the ongoing fiscal pressure, leaders have made some tough choices, and some departments have been forced to slash services, eliminate specialty units, and focus only on basic core functions and the most violent crimes. In Sacramento, California, police officers no longer respond to burglaries, misdemeanors, and minor traffic accidents. The traffic enforcement unit has been disbanded. Some detectives have been sent back to the streets. The department conducts only follow-up investigations on the most serious crimes, like homicide and sexual assault.2 Sadly, Sacramento is not unique.

In 2014, Camden, New Jersey, disbanded its entire police force as rising crime and a lack of funds led the city to transfer law enforcement duties to the county. Officials in Camden said that generous union contracts and declining aid from the state made it financially impossible to keep enough officers on the street.3 Similarly, in 2011, Millbrae, California, dissolved its police force and contracted with the San Mateo County Sheriff’s Department in an effort to save $1.1 million per year, and two other cities in that county, San Carlos and Half Moon Bay, have also dissolved their forces to contract with the sheriff’s department.4 These are not isolated instances—local California governments continue to struggle with ongoing financial issues, as evidenced by the high-profile bankruptcies of Vallejo, San Bernardino, and Stockton. Fiscal constraints, high pension costs, and changing public opinion have made it much easier for local leaders to cut services, including police forces. In the future, law enforcement leaders must plan ways to provide quality service with fewer resources to their communities.

How Are Departments Coping?

Technology and new crime strategies have allowed agencies to be more efficient and effective with their resources. An example of this is online reporting. In Sacramento, citizens filed more than 18,256 online reports in 2012.5 The online reporting program has saved thousands of labor hours and hundreds of thousands of dollars, while also allowing officers to focus on proactive patrol and smart policing strategies.

However, online reporting is impersonal and relatively unresponsive compared to in-person reporting, and there is little to no data on whether it helps reduce crime rates. During a recent round of community meetings in Sacramento, residents expressed a clear preference for face-to-face interactions between the police and victims of crimes. Many communities complain they have not seen the money saved by such a program reinvested back into the community through increased police presence or interaction.

The online reporting solution has not appeared to make much of a difference in Sacramento, which remains in the top 10 of California cities for violent and property crimes.6 Furthermore, a recent survey of Sacramento residents showed that their number one concern was crime. When asked if their neighborhoods had gotten better, stayed the same, or gotten worse, 33.3 percent thought their neighborhoods had gotten better or much better, 39.4 percent thought they stayed the same, and 26.6 percent thought their neighborhood was “somewhat worse” or “much worse.” The fact that about two-thirds of Sacramento residents felt their neighborhoods had either stayed the same or gotten worse in recent years reflects both a serious concern and an opportunity for change.7

As police leaders must continue to create new strategies on how to best close the gaps between budgets and essential services, technology and evidence-based policing strategies will be part of the answer. However, as demonstrated by Sacramento’s experience with online reporting, those strategies cannot solve every issue. Another area left largely unexplored to date are the ways that the privatization of policing might have a significant and beneficial impact on policing in the future.

Rising Feelings of Vulnerability

A 2013 poll by Gallup revealed that 64 percent of U.S. citizens believe crime is getting worse. This number has fluctuated over the past decade or so, from a low of 53 percent in 2004 to a high of 74 percent in 2009.8 That statistic is concerning, when one considers that the crime rate fell significantly over the same period of time. In many communities throughout the United States, violent crime fell by more than 50 percent.9 So what is at work here? Why do people feel that crime is going up, when the facts show it is going down?

One factor may be the well-publicized and large-scale incidents such as school shootings; the Boston Marathon bombing; and the Aurora, Colorado, shooting have contributed to a perception that people are less safe—even as crime continues to fall. The terrorist attacks on September 11, 2001, intensified those perceptions, as evidenced by the resulting federal legislation permitting airline pilots to carry guns aboard flights as the last line of defense against hijackings.10 The 2012 shootings at Sandy Hook Elementary created a renewed demand for the safety of school children In the United States, and schoolteachers in Israel and Thailand now carry concealed handguns on the job. In fact, in areas where the threat is considered the greatest, teachers have been given guns for free.11 In the United States, people are beginning to think that the changes made in the wake of the 1999 Columbine shooting did not go far enough. For example, in Colorado, Briggsdale School District allows trained teachers to be armed at school, and, in 2014, elected officials in Ohio approved a bill that would allow school boards to designate some school employees to carry concealed firearms.12 The feeling that these defense strategies are needed reflects the growing sense of fear among the public.

Dwindling Police Department Resources

As a result of the reductions in police personnel, many local law enforcement agencies are struggling to provide basic service to their communities. According to New York Times columnist Kate Zernike, as budgets shrink, it is no longer possible for each community to offer a full buffet of government services.13 This statement is bolstered by the fact that, according to the U.S. Bureau of Labor Statistics, law enforcement will grow by a paltry 41,400 jobs or approximately 5 percent of the 780,000 now employed.14 When paired with the increased feelings of vulnerability, the inability of the police to provide quality service to communities has caused some neighborhoods to seek out alternatives.

“You have to walk around in your house with a gun to feel safe,” said Oakland, California, resident Alaska Tarvins, who went on to say, “We don’t have a choice. Either die or hire some security ourselves, because we can’t depend on the police department.”15 That may seem extreme, but Tarvins’s statement does illustrate the attitude and frustration of some community members—and it seems the number of those feeling that way is growing. In 2014, Detroit, Michigan, Police Chief James Craig said, “There’s a number of CPL (concealed pistol license) holders running around the city of Detroit. I think it acts as a deterrent. Good Americans with CPLs translates to crime reduction.”16 Despite this perspective, an armed citizenry as an alternative to the police is not viable; instead, what may be a more realistic option is to engage the private sector to protect our communities.

Continue reading…

From Police Chief Magazine, here.

Not EVERYTHING Is ‘Bizuy Talmid Chacham’!

One of our dear readers is angry at me for approvingly quoting the words of a certain scholar, claiming, (A), I misunderstood the rabbi’s intention and (B), the idea set forth is so loathsome, why, putting these words in the late rabbi’s mouth constitutes the prohibition of shaming a Torah scholar — in spite of the fact I myself agree with the position, as I understand it!

But I cannot accept this.

Even if I was inadvertently misinterpreting things (I beg to differ), the only thing I ever need to worry about is the correctness of my reading. Were this reader’s thesis correct, we would find the same accusation lobbed about in Shas. (I think this is only done in such cases as Brachos 19b, where the sage quoted is being disagreed with, as well: תרגמה רב בר שבא קמיה דרב כהנא בלאו דלא תסור אחיכו עליה לאו דלא תסור דאורייתא היא אמר רב כהנא גברא רבה אמר מילתא לא תחיכו עליה כל מילי דרבנן אסמכינהו על לאו דלא תסור…).

We ought not to fear thought itself! (Subscribe and read the ebook to see what I mean…)

Brachos 19a:

המספר אחר מטתן של תלמידי חכמים מאי היא דתנן הוא היה אומר אין משקין לא את הגיורת ולא את המשוחררת וחכמים אומרים משקין ואמרו לו מעשה בכרכמית שפחה משוחררת בירושלים והשקוה שמעיה ואבטליון ואמר להם דוגמא השקוה ונדוהו ומת בנדויו וסקלו בית דין את ארונו.

Rashi:

דוגמא השקוה, על שהיו הם דומין לה השקוה, שהיו שמעיה ואבטליון מבני בניו של סנחריב כדאמרינן בגיטין בפרק הנזקין.

Anything less than this horrific, unspeakable ridicule must not qualify as מספר אחר מטתן, otherwise, a stronger chiddush would surely have been cited.

And it appears to me the bar here is even higher:

Nedarim 50b:

אמרה ליה בת קיסר לרבי יהושע בן חנניה תורה מפוארה בכלי מכוער אמר לה למדי מבית אבוך במה מניחין יין אמרה ליה במאני דפחרא אמר לה כולי עלמא בפחרא ואתון במאני דפחרא אתון אחיתון במאני דכספא ודהבא אזלת ורמת חמרא במאני דכספא ודהבא וסרי אמר לה אף אורייתא כן והאיכא שפירין וגמירין אמר לה אי הוו סנו הוו גמירין טפי ההיא דאתיא לקמיה דרב יהודה מנהרדעא לדינא ואיתחייבת מן דינא אמרה ליה שמואל רבך הכי דנן אמר לה ידעת ליה אמרה ליה אין גוצא ורבה כריסיה אוכם ורבה שיניה אמר לה לבזוייה קאתית תיהוי ההיא אתתא בשמתא פקעה ומתה.

Find what I wrote about similar religious OCD\scruplosity\”nerves” problems elsewhere.

As for quoting a scholar’s words in the correct context for the sake of disagreement, see the article here:

Repeating a Rabbi’s Own Words Is Not Lashon Hara!