Follow Up to the Post on the Robert Lucas Interview with the Wall Street Journal

More Evidence that the Nobel Prize Committee Might Want to Ask for the Trophy Back (You Can Keep the Money)

Nobel Prize winning economist and embodiment of the “Chicago School” of economics Robert Lucas was the subject of an interview and report in a recent issue of the Wall Street Journal.  The interview was about the best example there is of why technical economists who have no real world experience and carry an ideological bias should not discuss the practical side of economics (Paul Krugman excepted). They come across as woefully ignorant.

The Dismal Political Economist has already illustrated the many problems with Mr. Lucas’s policy statements and ideological positions.  Now Mark Thoma has a discussion complete with a nice piece of data that debunks another of Mr. Lucas’s positions.  Here is what Mr. Lucas said

For the best explanation of what happened in Europe and Japan, he points to research by fellow Nobelist Ed Prescott. In Europe, governments typically commandeer 50% of GDP. The burden to pay for all this largess falls on workers in the form of high marginal tax rates, and in particular on married women who might otherwise think of going to work as second earners in their households.

So high marginal tax rates discourage women from going into the workforce.  Ok, a reasonable hypothesis, but one subject to examination.  Here is a chart that shows the relationship between marginal tax rates and labor force participation by women.

Uh oh.  The chart shows that contrary to Mr. Lucas’s position, in general the higher the marginal tax rates, the greater the participation by women in the labor force.  See it may be that with high tax rates, governments are able to provide services to families that allow women to enter the labor force and produce goods and services and grow an economy.

Next time Mr. Lucas, check the facts before you say something that cannot be supported.  It will keep both you and the Nobel Prize folks from being totally embarrassed.