Send More Witch Doctors

The title of this post is the retort that supply side economists used when others disparaged their thinking as "Voodoo Economics". Of course, many have talked about the irony of Bush the Younger using the Voodoo Economics that his father disdained. I am not a supply sider - I think of myself more along the lines of a classic liberal -- but some of the policies that supply siders advocate, such as cutting marginal tax rates, fit in with my philosophy. In fact, the Laffer Curve was first demonstrated in Congress way back in the 1830s to demonstrate the futility of raising tariffs too high by none other than John C. Calhoun. So, much to my father's chagrin, my family has a long history with Voodoo Economics. This story from National Review Online by Ashby M. Foote III discusses the disparity between the two employment surveys.

If you have one of the 3.3 million jobs the Labor Department can’t explain, please contact Secretary Elaine Chao at www.dol.gov. That’s right: 3.3 million new jobs is the cumulative difference between the Labor Department’s two ongoing surveys (payroll and household) since the current economic expansion began in November 2001.

The gist of the story is that the household survey captures new small businesses that are formed while the establishment survey only captures the jobs created by larger companies. The disparity is caused by the ease of new business formation and the changing ways that technology allows people to work. Glenn Reynolds, of Instapundit fame, talks about this in his book, "An Army of Davids" and the author of this article mentions Chris Anderson's "The Long Tail" both of which I enjoyed and generally agree with. However, I would point out that over time the household survey and the establishment survey tend to even out so I'm not sure there's anything to this. I would think that if the economy were creating that many jobs, consumer confidence would be appreciably higher. Maybe all those "Davids" have created a job because they couldn't find one at an established firm?

If you wonder what a "classic liberal" is, I'll just say it has nothing to do with the current usage of the term and point you to this book "Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty First Century" by Deepak Lal.