Permanence
The evidence is clearer for the European countries than for the U. S. In Europe, the allowances for unemployed have been pretty generous since the 1950's, and have remained generous. In 1955-1970, several of those countries had much lower unemployment than the U. S. did, and in 1980-1990, most of those countries had much higher unemployment -- both higher than the U. S. had and higher than they themselves had in the earlier period. This seems to show that generous government help for the unemployed can exist with either very high or very low unemployment rates.
In response to this point, a defender of the New Classical position sent me this message by e-mail: "Maybe not. Expectations may have changed, persons' attitudes toward the dole may have changed, and populations certainly have changed ...." His position seems to be that over a generation, (1950-1980), the generous unemployment support caused a change in the culture and thus an increase in job search and unemployment. One cannot rule that possibility out, but it isn't an explanation for short-run fluctuations in unemployment, which is what the New Classicals had in mind.
Thus, the evidence from Europe is that unemployment can be either very high or very low with generous unemployment support, so there must be other and more powerful causes for fluctuations in unemployment in the short run. The evidence from the United States and Japan does not seem clear enough either to clearly support or contradict the European evidence. In the terms of the Reasonable Dialog, the European evidence undercuts the New Classical interpretation of unemployment, unless the New Classicals can find some reason -- perhaps through a more careful statistical analysis -- why this evidence does not apply or has been misinterpreted.
Until then, the available evidence does not seem to support the prescription.
Permanence
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