Via, a piece from one of today\’s Nobel Laureates in economics:
Here is his 2003 paper praising British labor market policy:
Unemployment in Britain has fallen from high European-style levels to US levels. I argue that the key reasons are first the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second the decline of trade union power. I interpret the reform of monetary policy as an institutional change that reduced inflationary expectations in the face of falling unemployment. The decline of trade union power contributed to the control of wage inflation.
Fewer trade unions, less unemployment. An interesting point, eh?
Oh, and as Alex Tabarrok points out:
The 2010 Nobel Prize awarded to Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides can be thought of as a prize for unemployment theory.
A key breakthrough was to realize that the problem was not how to explain unemployment per se but rather how to explain hiring, firing, quits, vacancies and job search and to think of unemployment as the result of all of this underlying microeconomic behavior.
It really ain\’t just all about how much money the government is spending as various crude Keynesians would have it.
It really does depend upon all that microeconomics….you know, the neo-classical economists\’ tool kit stuff you need to be able to do micro?