We have high unemployment because...

Casey Mulligan says it's because young people aren't looking for jobs hard enough.  As evidence, he cites elderly employment rates staying constant or rising during the recession.  So, Mulligan's view is that we essentially don't have a shortfall of demand (as New Keynesian models suggest), but we have over 9% unemployment because... young people aren't looking for jobs hard enough.  He looks at the employment to population ratio both in the aggregate and for old people, then argues that, because the 65-69 and 70-74 demographics performed much better on this measure than the population at large, people should have taken the example of the old folks and looked for jobs harder.  And if they had, well, we'd be back to full employment in no time.

If this sounds intensely stupid to you, that's because it is.  I seriously doubt that young people in 2011 just don't look for jobs all that hard compared to... young people in 2005, or young people in 1998.  The more likely explanation is... exactly what the New Keynesian models suggest.  As Mulligan acknowledges, old people saw the values of their homes decline, and saw their retirements as less secure, so they entered the job market when they might otherwise have been retired.  And, yes, they looked for jobs more intensely than 22 year olds because, let's be honest, a 22-year-old recent college grad can count on some manner of support from her parents, while an old person will feel deathly afraid of being 75 years old and destitute.  So, sure, more old people entering the labor market and looking for jobs more intensely is going to improve their employment-population ratio.  But, as a simple supply-demand graph for the labor market would tell us (in the same implicit argument that I made in my Texas post), old people entering the labor market and willing to work for low wages will push the supply curve for labor outward (meaning that we might see jobs, but those jobs will drive wages down, and will not do anything to improve AGGREGATE unemployment numbers), but won't resolve the aggregate demand shortfall that the New Keynesian models tell us is at the heart of our job problem.  In other words, more old labor market participants doesn't change the number of jobs (besides to the extent that they may drive down wages, spurring deflation), but it DOES increase the number of people competing for the jobs that do exist.

Put another way, if you believe Mulligan, you think the key to getting to full employment is by young people to look harder for those jobs that are out there for all of them, if they just look under the tree stump, in the shed, and on top of the coffee table.  If you believe the New Keynesian models, the key is jump-starting the total amount of demand in the economy, either through more creative expansion of credit (though that does create potential for asset bubbles) or through debt-financed government purchases that put to work people who would otherwise be sidelined.  I think, unlike with most Economic arguments, there's a real intuitive answer here...