By Bryan Caplan
I’m back from the Kansas City econobloggers’ conference. My personal highlight: I managed to extract a bet from Mike Shedlock, a.k.a. Mish. On the fiscal crisis panel, Mish predicted high unemployment for the next ten years. This provoked a lot of heat but little light. Over dinner, though, Mish and I hammered out the following bet:
If the official initially reported U.S. monthly unemployment rate falls below 8.0% for any month between now and June, 2015, I win $100. Otherwise, Mish wins $100.
Mish based his pessimism on the implausibility of rapid job growth in construction and other key sectors. I saw this as misleading “near” reasoning – and took the “far” road instead. My position: During the last big recession in the Eighties, the unemployment rate fell about 1 percentage-point per year after the peak. So while full recovery is indeed about five years away, it would be very surprising if unemployment stayed at 8% or more for three years, much less five. Where will the new jobs appear? If I knew that, I’d probably be investing in them instead of blogging about my bets!